British American Tobacco: Solid H1 And Still A 7.7% Dividend Yield (Preview)

Company Update (BATS LN) (Buy)

Summary

• British American Tobacco’s H1 2021 pre-close update showed a stable performance in line with our investment thesis on the sector.

• In local currencies, the company now expects the same mid-single-digit EPS growth in 2021 as before, but with better revenue growth.

• In cigarettes, BAT expects an industry volume decline of 3% globally, with strong price mix in the U.S., and volume recovering in Emerging Markets.

• In New Categories, BAT has showed some year-on-year growth and share gains, but is still behind the leader in each category.

• With shares at 2,817.35p, we expect a total return of 61% (16.2% annualized, including a 7.7% Dividend Yield) by 2024 year-end. Buy

Introduction

British American Tobacco ("BAT") released a pre-close update on its H1 2021 this morning (Tuesday, June 8). BAT stock closed up 1.6% in London, at 2,817.35p.

We upgraded our rating on BAT to Buy in March 2020. Since then shares have gained 21.3% (including dividends) in GBP, or nearly 50% in USD.

Buy Case Recap

Our inv…