Treasury Wines’ 1H Results Offer Some Optimism for Future Profitability; AUD 11 FVE Maintained

No-moat Treasury Wine Estates began to feel the effects of lofty tariffs closing the door to the lucrative Chinese export market in the first half of fiscal 2021, but also enjoyed rising margins versus the beleaguered second half of fiscal 2020 given relaxing COVID restrictions in Australia and the shedding of commercial brands in the U.S. In all, the company’s revenue fell 8.2% to AUD 1.4 billion versus the pcp, tracking our projected mid-single-digit full-year decline, while adjusted EBIT rose more than 70% from 2020’s second half to AUD 284.1 million, a margin improvement to 20% from 15%.