Swedish Match: Nicotine Pouches Growing Again In Q1, EPS Up 36% (Preview)

Company Update (SWMA SS) (Buy)

Summary

• U.S. volume for ZYN nicotine pouches has resumed growing in Q1 as we predicted, following an inventory-driven dip in Q4 2020.

• ZYN has retained a 64.9% share of the U.S. nicotine pouch market, which is continuing to grow strongly, with some forecasting a 25% CAGR.

• U.S. Cigars grew shipments by 21.5%, thanks to strong market demand; the impact of FDA proposals to ban flavoured cigars will be limited.

• Overall, even with an FX headwind, group sales grew 10.6%, EBIT grew 28.4% and EPS grew 35.5% year-on-year in Q1 2021.

• With shares at SEK 75.74, we expect an exit price of SEK 115 and a total return of 51% (12.4% annualized) by the end of 2024. Buy.

Introduction

Swedish Match released its Q1 2021 results on April 30.

We originally initiated a Buy rating on Swedish Match stock in September 2020. Since then shares have gained 6.7% (including dividends).

In this article we explain how Swedish Match's Q1 results support our investment case, which we believe will generate a low-teens annualized r…