Imperial Brands: CEO Exiting on a Top after H1 FY25?
Company Update (IMB LN) (Neutral): IMB’s “value” case may be better than those at Altria and BAT, but structural dangers are not going away.
Highlights
IMB shares have fallen 7.5% since H1 FY25 results and CEO exit news.
At 2,674p, 8.7x FY24 EPS, 10%+ FCF Yield and 6.0% Dividend Yield.
Tobacco & NGP Adjusted EBIT grew by 1-2.5% ex. FX in each region.
But negatives are mostly structural while positives may be non-repeatable.
NGP business is far smaller than needed and irrelevant outside Europe.
Introduction
Imperial Brands (“IMB”) reported H1 FY25 (ending March 31) results yesterday (May 14). Shares have fallen 7.5% in the 2 days since then, but have still risen by 34.6% in the past year:
IMB Share Price (Last 1 Year)
Source: Google Finance (15-May-24).
We have been consistently cautious on IMB since initiating a Neutral rating in July 2019, preferring instead to hold Philip Morris (“PM”) as a core position. This means we missed out on a significant gain in IMB stock, but captured an even larger gain on PM. (For example, IMB shares have risen 41% in Dollars in the past year, but PM shares have risen 68%.) We last published our IMB research online in November, when we discussed how we have been too pessimistic.
IMB has more earnings growth than Altria and British American Tobacco, due to a higher discount mix in U.S. cigarettes and recent operational improvements. This dynamic has continued in H1 FY25, though structural risks also remain.
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