Ann: TWE 2020 AGM Addresses and Q1 Trading Update, page-53

Thanks for the reply, and a bit more behind your reasoning Ash. I think we both agree, there's downside in the near term, it will likely drop towards 6 (maybe test high 5's), so I'm not at all suggesting this is a buy (just see my sentiment). I still see 4 as an extreme reach, and it would need a lot of things to go wrong.

I see you're coming at this from a technical more than fundamentals view. From a fundamentals side, i tend to differ in opinion here, this share (ex. china) is worth in the 6-10 range as per my model.

60% of their EBIT still remains outside of Asia, and while growth in China was faster, there was growth in other regions already. Also the 40% sales to Asia, is not completely china (around 75%).

Also have to factor in, of that 30%, not all of the chinese sales are australian brands. TWE's ex-Aus operations (around 1/3) also sell to china, though a smaller amount. While TWE hasn't given great transparency, this amounts to a hit of 25% EBIT. The current fall is much beyond that (I understand growth was prices in, but we're 50% down already, to get to 4, we'd be 75% down.

TWE has a very healthy balance sheet, with no near term threats to funding, so we can eliminate that too.

TWE isn't A2M, where sales in Aus for example are still driven by chinese (daigou) demand, the numbers are much more transparent.

Secondly, we all seem to be assuming here China isn't bluffing. Chinese growers have cut wine production for the last 5 years in a row. Per capita consumption remains low compared to europe, with strong growth and headroom there. China can't fully fulfil their wine either internally, or from europe (some options exist like cypriot wines, but they don't carry the same trust).

https://en.vinex.market/articles/2019/01/28/chinas_wine_production_down_by_nearly_40_last_year_as_consumers_switch_to_imports

Chinese government support has been strong due to more and more citizens getting their luxuries, and a higher QOL. Wine is one of those items, and I just can't see them doing a bit of suicidal move by creating a wine shortage (especially in the more affordable bracket Australian wines sell to).

TLDR: Short term sell, Challenges ahead, 4 is a reach though