Treasury Wine Estates Positioned for Growth Following DAOU Vineyards Acquisition and Potential China Tariff Removal

Leading Australian blue-chip company Treasury Wine Estates Ltd has garnered attention from investment firm Morgans, which views it as a strong buy opportunity in the current market climate.

Morgans’ positive outlook is heavily influenced by Treasury Wine’s recent acquisition of California-based DAOU Vineyards, a move that is expected to bolster the company’s premiumisation and growth strategy significantly.

The acquisition, valued at approximately US$900 million (A$1.4 billion), fills a crucial gap in Treasury Americas’ portfolio and is projected to enhance margins due to DAOU’s strong earnings growth and high-margin operations.

While the acquisition necessitated a substantial capital raising effort, the potential upside of the deal, if successfully executed, could be substantial for Treasury Wine shareholders.

One key catalyst that could drive Treasury Wine Estates’ stock price higher, as noted by Morgans, is the anticipated removal of Chinese tariffs on Australian wine imports, which is a development that could have a significant impact on the company’s future performance.

Morgans has assigned an ‘add’ rating to Treasury Wine Estates’ shares and set a price target of $14.03, representing a potential upside of 15% from the current trading levels.

Additionally, investors stand to benefit from the company’s dividend payments, with expected partially franked dividends per share of 36.4 cents in FY 2024 and around 45 cents in FY 2025, translating to dividend yields of 3% and 3.7% respectively based on the current share price of $12.20.

A successful execution of the DAOU Vineyards acquisition and the potential resolution of the Chinese tariffs issue could position Treasury Wine Estates for substantial growth in the coming years, offering investors an attractive total return potential of approximately 18% based on Morgans’ assessment.