Treasury Wine Estates Ltd (ASX: TWE) shares have lost 21.41% of their value in 2025 so far.
The ASX 200 wine share is currently changing hands for $8.87 apiece, up 0.45% today.
Several brokers reckon Treasury Wine Estates shares are a steal at today's price.
Not only that, but the latest wine export data indicates a tailwind for the company's world-famous luxury Penfolds brand.
China becomes Australia's No. 1 wine customer again
Wine Australia recently released export data for the 12 months ending 31 March.
This is the first full year of data since China removed its tariff of up to 218% on Australian wines in March last year.
China originally imposed the tariff on our winemakers in November 2020.
The figures show exports to mainland China surged from $200 million in the year to March 2024 to $1.03 billion in the year to March 2025.
That made China our No. 1 customer by value for the year.
The value of exports to China far exceeded other countries. The second biggest market was the United Kingdom at $353 million, down $12 million from last year, followed by the United States at $323 million, down $32 million, and Hong Kong at $154 million, down $136 million.
In the 12 months ended March 2025, Australian wine exports overall increased by 41% in value to $2.64 billion.
The data indicates rising demand for more expensive wine labels, given the volume of overall exports only increased by 6%.
The average value of exports increased by 33% to $4.09 per litre free on board (FOB), the highest average value in almost 20 years.
Wine Australia's manager of market insights, Peter Bailey, said this was "mainly due to the elevated level of premium wine shipments to mainland China …".
China loves the premium labels
In just one year, the total value of wine shipments to mainland China returned to similar levels as before the tariff was imposed in 2020.
However, the volume of exports to China in the year to March was 23% lower than the 2016-2020 average and 44% below the 2018 peak.
The average value of wine exports to China in the 12 months to 31 March was $23 per litre, much higher than any other market.
Bailey said this indicated that China was much more interested in Australia's premium and luxury wine products, commenting:
The lower volume and high average value demonstrate that mainland China is a premium market for Australian wine and will therefore not solve oversupply issues in Australia.
Treasury Wine's renowned luxury Penfolds label is very popular in China.
To get around the 218% tariff, Treasury Wine created its Penfolds China country of origin portfolio in 2023.
Producing wine in China was part of a multi-country sourcing strategy for the Penfolds brand, which wanted to diversify its production locations.
In July 2023, Treasury launched its first Chinese winemaking trial with the creation of its 521 wine.
Penfolds a 'highly admired' luxury brand in China
Treasury Wine Estates has continued to expand its production capacity in China to serve the thirsty local market for Penfolds.
In March, Treasury Wine completed the acquisition of 75% of Ningxia Stone & Moon Winery Co. Ltd.
Treasury's CEO, Tim Ford, said the acquisition was "a significant step forward for TWE, and Penfolds, in China".
He added:
Through this acquisition, we will further strengthen our commitment to, and investment in, the China wine industry, where Penfolds continues to be a highly admired and sought after brand.
The successful evolution of Penfolds to becoming a multi-country of origin brand has been a significant execution highlight in recent years, with the China sourced portfolio having resonated particularly strongly with Chinese consumers, and we look forward to continuing that momentum through this important long-term investment.
Wine exports to other countries fall
Wine Australia's data shows that if you exclude China exports, there was a 13% overall decline in export value and a 9% fall in volume.
This was the lowest export value to the rest of the world in 10 years and the lowest volume in more than 20 years.
While the decline in value was mainly driven by Hong Kong as sales transitioned to mainland China, the volume drop was due to a fall in demand from the UK, the US, and Canada.
Wine Australia notes a global trend in people drinking less alcohol for health reasons. It also said global cost-of-living pressures and economic and political turmoil were headwinds for the Australian wine industry.
The escalating global trade war, sparked by US tariffs, is a further headwind and may result in higher prices for consumers.
Impact of US tariffs
Australian wine exported to the US is now subject to a 10% tariff.
Wine Australia says it is difficult to predict how the tariff will affect Australian wine exports to the US in the short to medium term.
Australian wine exports to the US have been on a long-term downward trajectory and are now at their lowest level since the early 2000s.
In a statement on 3 April, Treasury Wine Estates said it did not anticipate the US tariff would have a material impact on its business.
Treasury said its Americas division contributed 36% of the group EBITS in 1H FY25 and was well-placed given its portfolio composition.
Specifically, only 15% of the portfolio's wine labels were Australian and New Zealand-produced wine, primarily 19 Crimes and Matua.
The rest was US-produced wine, most notably the luxury labels including DAOU, Frank Family Vineyards, and Beringer.
Should you buy Treasury Wine shares?
Goldman Sachs is predicting double-digit earnings growth for Treasury Wine Estates through to at least FY27.
The broker has a buy rating on Treasury Wine Estates shares with a 12-month price target of $12.90.
This implies a potential upside of 45% for the ASX 200 wine share over the next year alone.
Macquarie has Treasury Wine Estates in its model growth portfolio.
The broker has an outperform rating on Treasury Wine Estates shares with a price target of $11.70, implying a potential 32% upside.
The consensus rating among 17 analysts on the CommSec platform is a 'strong buy'.
