Philip Morris: Even More Bullish After Investor Day

Company Update (PM US) (Buy)

Highlights

• New 2024-26 targets include 9-11% ex-FX EPS growth

• U.S. IQOS plans are phased, reducing near-term earnings risk

• PM leads in key areas like tobacco flavors and wet pouches

• With shares at $92.17, P/E is 16.5x and Dividend Yield is 5.6%

• We see 98% total return (25.6% p.a.) by end of 2026. Buy

Introduction

We are updating our Philip Morris (“PM”) investment case after the company’s investor day last week (September 28).

We believe PM will be the key structural winner from Tobacco’s transition to Smoke Free Products (“SFPs”), and the investor day has strengthened this view. PM has announced new 2024-26 targets that include an acceleration of Adjusted EPS growth to 9-11% (ex-currency), driven by growth in SFPs but backed by a still-robust Combustible business. SFPs are now more than 35% of revenues, and should exceed 50% by 2025, potentially driving a re-rating.

We have also learned more about PM’s U.S. IQOS plans, which will be phased and partly dependent on FDA authorization of ILUMA, r…