Imperial Brands: Fundamentals Worsening Despite 7.7% EPS Growth In H1 FY22

(Preview) Company Update (IMB LN) (Neutral)

Summary

• Imperial Brands shares rose 7.9% in London after H1 FY22 results, but we believe they show that underlying fundamentals have gotten worse.

• Adjusted EPS rose 7.7% excluding currency, but largely due to non-operational or non-recurring factors. Revenues rose just 0.3%.

• Price/mix was less than 1%, weaker than prior years. Profit fell in Europe, but was helped by one-offs in other markets.

• Next Generation Products made little progress, with a low 3% share in Heat Not Burn in two countries, and a falling share in U.S. Vapor.

• At 1,847.5p, shares have a 7.5x P/E and a 7.6% Dividend Yield, but we expect them to continue underperforming peers. Avoid.

Introduction

We review our Hold rating on Imperial Brands PLC("IMB") following the release of H1 FY22 (ending 31 March) results this morning (May 17). IMB finished the day in London up 7.9%.

We initiated our Hold rating on Imperial Brands in July 2019. IMB has significantly underperformed its peers since then, and its share price remains lower tha…