Treasury Wine Estates Ltd (ASX: TWE) shares are among a rare bunch trading in the green for the year so far — up 8% in 2022 and outperforming the S&P/ASX 200 Index (ASX: XJO) by a significant margin.
The ASX 200 is down 5.7% over the year to date.
The Treasury Wine share price cracked a multi-year high of $13.70 on Tuesday. The last time Treasury Wine shares were at this level was before COVID-19 in January 2020.
Today, Treasury Wine shares are changing hands for $13.49, up 0.37% for the day so far.
Image source: Getty Images
What's boosting the Treasury Wine share price of late?
With no price-sensitive news out of Treasury Wine this month, that multi-year high might have been due to Prime Minister Anthony Albanese's meeting with Chinese President Xi Jinping at the G20 in Bali.
The meeting in itself was significant after a couple of years of the 'silent treatment' from China, not to mention the trade sanctions imposed on many of our goods, including wine.
The market might have read a potential thawing in our relationship with China as good for exporters if sanctions are lifted.
Treasury used to export a lot of its wines to China, but this has all but ceased due to the tariffs.
What do the experts think?
According to The Australian, Tribeca's Jun Bei Liu thinks the outlook for Treasury Wine, with or without an improved relationship between Australia and China, "is just phenomenal".
Liu said:
Putting aside China, I think the outlook for [Treasury] is just phenomenal. The company is going to grow over 20 per cent in the next couple of years, just through the reopening … so it has that tailwind to really drive growth.
Liu notes that tensions with China resulted in a big share price fallback in 2020, making Treasury Wine a value buy.
At around $9 per share at the time, she said investors weren't paying for brand loyalty or future demand for premium labels.
Treasury survived the China freeze-out by successfully establishing new export markets for its wines.
The team at Goldman Sachs are also backing the Treasury Wine share price for growth.
As my Fool colleague James reported this week, Goldman thinks the company is back on track to deliver strong earnings growth in the coming years.
Goldman said:
With proven redirection of Penfolds China volumes as well as refocusing Treasury Americas on premium/luxury, TWE is now re-entering a growth phase with a more diverse and defensive business.
We have increased our FY23-25e sales and NPAT by 1%-5% and 5%-13% and now expect the company to deliver ~16% NPAT 2022-25e CAGR.
The company is trading at a 12m forward P/E of 22.6x, vs our TP implied P/E of 26.3x.
Goldman has a buy rating on Treasury Wine with a 12-month share price target of $14.70.
