It hasn't been a pleasant few months (or indeed few years) for the Treasury Wine Estates Ltd (ASX: TWE) share price. Yesterday, this ASX 200 consumer staples stock and wine-making company finished down a hefty 1.51% at $11.75 a share.
That leaves Treasury Wine shares down by 10.17% year to date in 2023.
Zooming out, the picture doesn't look much better. The Treasury Wine share price is also languishing 4.63% lower than where it was a year ago. In fact, Treasury Wine shares are still down by 34.9% from where they were five years ago.
There's little doubt that most of Treasury Wine's woes over the past few years have stemmed from the Chinese market. Treasury Wine bet big on building an export business to China last decade. But much of that hard work was undone after relations between the Australian and Chinese governments deteriorated from 2018 onwards.
In 2020, the Chinese government began levying 'anti-dumping duties' on Australian wines. These almost single-handedly shut off Treasury's access to the formerly-lucrative Chinese market.
These developments, and subsequent share price woes, would certainly be disappointing for Treasury Wine investors to contemplate today. But it also might be piquing the interest of the more value-orientated investors out there.
As such, today is a perfect opportunity to discuss whether it might be worth pouring some shares of Treasury Wine into one's portfolio while they are still under $12 a share.
Image source: Getty Images
Are Treasury Wine shares a buy under $12 each?
Let's ask The Motley Fool Australia investing team for some insights into Treasury Wine today. Here's some of what they had to say:
Although the Chinese duties have had a meaningful impact on group earnings, we have remained positive on Treasury's long-term story and management has done a commendable job of growing the business in other markets…
To be clear, we're taking a long-term view on the China market opportunity, and even if the duties on Australian wine ceased today, there wouldn't be an overnight recovery…
Excluding mainland China sales, Penfolds NSR increased 45% in FY2022, so while the duties have meaningfully impacted performance (Penfolds total NSR was down 9% in FY2022), the trade issue has also forced Treasury to become stronger in terms of diversifying its supply chain and sale markets.
Our own chief investment officer, Scott Phillips, added the following:
The Treasury story is a compelling one: a cashcow business here in Australia, a stabilised and growing international business and the raw potential upside from an eventual and ongoing recovery in China where Treasury's brands – Penfolds in particular – have been, and should again be, in high demand at high prices.
That's pretty unambiguous. Remember, a low share price can sometimes represent a great time to buy shares of a quality ASX company when it is being overlooked by the broader market.
