Treasury Wine Estates: Demand for Luxury Wines Remains Strong

We maintain our AUD 11.50 fair value estimate for shares in Treasury Wine Estates. We make no changes to our forecasts, which broadly track qualitative guidance. We expect fiscal 2024 revenue growth of about 8% and an underlying EBIT margin of about 24%—a 57-basis-point increase from fiscal 2023. We expect the firm's strategic focus on high-end wines and its increased geographical diversification to benefit both long-term revenue growth and profitability. But despite some strong brands, Treasury lacks an economic moat. The wine industry is highly competitive, and volatility in consumer preferences limits Treasury's ability to maintain excess returns over the long term.