Our 12-month price target on TWE is A$11.50, offering upside of 8.7% and is based on a 50:50 weighted EV/EBIT-based SOTP and DCF. Key upside risks are: (1) Declines in the A$/US$ FX rate; (2) a faster recovery of trading in the US operations; (3) earnings enhancing acquisitions; (4) better-than-expected execution of the China strategy and (5) tangible progress on TWE’s proposed demerger of Penfolds. Key downside risks are: (1) further deterioration in China from macro or execution; (2) further execution issues from direct strategy in the US; (3) unanticipated increase in working capital; (4) risks of misalignment of significant inventory build with demand; and (5) margin pressure from retail partners.
TWE Price at posting:
$9.87 Sentiment: Hold Disclosure: Held
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