Treasury Wine Estates Ltd (ASX: TWE) shares could be good value at current levels.
That's the view of analysts at Goldman Sachs, which have been running the rule over the wine giant.
What is the broker saying about Treasury Wine?
Goldman notes that industry data is pointing to a challenging period for the company.
For example, in the United States between January and April, data shows that "TWE total sales fell 6.7% comprised of volume -13.4% and average price +7.8%. 19 Crimes trended similarly with total sales -3.6% YoY."
Nevertheless, thanks to those price increases, Goldman believes "margin improvement should still be apparent YoY."
Over in China, it notes that "cash challenged" traders and distributors have been "liquidating high quality import wine at low prices which will likely pressure demand for Penfolds despite a potential review of tariffs in CY23."
In addition, over in Hong Kong, potential over-stocking "is emerging as traders readied for reopening but were met with soft demand."
One positive, though, is that Goldman Sachs expects "Asia-ex-China sales to remain robust in 2H23." Though, it concedes that sales "could soften into FY24 if end demand does not pick-up."
Overall, this has led to the broker revising down its "FY23-25e group Sales by ~2%/2%/4% and EBITS by ~1%/1%/3%."
What does this mean for Treasury Wine shares?
Despite the above, the broker remains positive. It highlights that "the recent selling of the stock sufficiently reflects this risk." As a result, it sees plenty of value in Treasury Wine shares.
Goldman has retained its buy rating with a trimmed price target of $14.50, which implies potential upside of 12% for investors over the next 12 months.
And with the broker expecting a 3% dividend yield in FY 2024, the total potential return stretches to approximately 15%.
