0R15 9025.0 0.0% 0R1E 9410.0 0.0% 0M69 None None% 0R2V 247.99 9682.643% 0QYR 1567.5 0.0% 0QYP 439.3701 -2.9016% 0RUK None None% 0RYA 1597.0 1.2682% 0RIH 195.55 0.0% 0RIH 191.4 -2.1222% 0R1O 225.5 9683.0803% 0R1O None None% 0QFP 10475.8496 107.8542% 0M2Z 252.573 0.2373% 0VSO 33.0 -7.3164% 0R1I None None% 0QZI 622.0 0.0% 0QZ0 220.0 0.0% 0NZF None None% 0YXG 222.05 -4.1318%
Company Overview: British American Tobacco p.l.c. (NYSE: BTI) is focused on manufacturing and selling cigarettes, tobacco, and other nicotine products internationally. The company distributes its products to retail outlets across the U.S., Europe, and North Africa (ENA), Americas and Sub-Saharan Africa (AMSSA), and the Asia Pacific and Middle East (APME) regions. As of July 28, 2021, there are 2.29 billion American Depository Shares (ADS) of BTI listed and outstanding (each ADS representing one ordinary share).
BTI Details
Key Brands: The company’s key brands in its Combustibles segment include Dunhill, Kent, Lucky Strike, Pall Mall, and Rothmans. Vuse, one of the brands under its New Category segment (which offers affordable alternatives to traditional nicotine consumption), was declared the world's first global carbon-neutral vaping brand in May 2021.
Key Takeaways for H1FY21 (ended June 30, 2021):
Supportive Evidence for New Categories Products: On July 01, 2021, BTI announced that in a year-long study conducted on the effects of glo, BTI’s tobacco heating product (THP), on UK-based smokers aged 23 to 55, it was observed that switching to glo showed a significant reduction in indicators of potential harm compared with participants continuing to smoke cigarettes.
Segment Wise Revenue Distribution:
Other Key Findings in H1FY21:
Region-wise performance; Analysis by Kalkine Group
Balance Sheet & Liquidity Position:
Key Metrics: In H1FY21, Operating and net margins were 40.3% and 27.3%, higher than the H2FY20 figures of 36.0% and 21.6%, respectively. EBITDA margin stood at 44.5%, slightly lower than the year-ago figure of 46.6%. Debt/Equity of the company was 0.72x as of June 30, 2021, vs. 0.73x as of June 30, 2020.
Profitability and Leverage Profile; Analysis by Kalkine Group
Top 10 Shareholders: The top 10 shareholders (in terms of ownership of ordinary shares listed on the LSE) together form around 32.13% of the total shareholding, while the top 4 constitute the maximum holding. Spring Mountain Investments, Ltd. and BlackRock Institutional Trust Company, N.A. hold the maximum stake in the company at 6.59% and 5.79%, respectively, as also highlighted in the chart below:
Top 10 Shareholders; Analysis by Kalkine Group
Risk Analysis:
Outlook: The company will continue to make additional investments for further growth in its New Categories segment in H2FY21, and it estimates that the losses from this segment will continue reduce in FY21, reaching profitability status by FY25.
Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: Over the last one month, BTI has corrected ~4.39%. The stock is currently close to the mid-point of its 52-weeks trading range of USD 31.60 to USD 41.14. We have valued the stock using the EV/EBITDA multiple-based illustrative relative valuation method and arrived at a target price with an upside of high teens (in percentage terms). We believe that the company can trade at a slight discount compared to its peer’s average, considering the risks involved with the extensive regulatory scrutiny, volatile tax regimes, competition from counterfeit product supply, and foreign exchange risk. We have taken peers like Philip Morris International Inc. (NYSE: PM) and Altria Group, Inc. (NYSE: MO), among others. Considering the growth in the New Categories segment, decreasing debt, encouraging outlook, robust dividend yield, and current valuation, we give a “Buy” recommendation on the stock at the closing price of USD 37.93, down ~1.74% as of July 28, 2021.
BTI Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.
Technical Indicators Defined
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.
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