British American Tobacco: Stable H1 Headlines, Some Worrying Signs But 7x P/E
Company Update (BATS LN) (Buy)
Highlights
Total U.S. revenues fell 5.4%, even after strong Vapour growth
The other 2 regions grew revenues and profits high-single-digits
U.S. market may be turning; non-U.S. strength may be one-off
Undemanding valuation with 7x P/E and 8.7% Dividend Yield
We see 110% total return (27.5% p.a.) by end of 2026. Buy
Introduction
British American Tobacco ("BAT") released H1 2023 results last Wednesday (July 26). BAT shares in London have been roughly flat since results, and are currently down 18% in the past year (in GBP; ADRs are down 14% in dollars):
BAT Share Price Performance (Last 1 Year)
Source: Google Finance (30-Jul-23).
We upgraded our rating on BAT to Buy in March 2020. Since our upgrade, shares have gained 32% (in GBP, including dividends), but the share price has fallen by 25% since May 2022.
H1 2023 results were mixed, with several areas of concern. Group Adjusted EPS grew 5.3% year-on-year excluding currency, and full-year guidance of mid-single-digit growth was reiterated. However, t…