Swedish Match: Potential To Double After ZYN Widened Its U.S. Lead In Q4

(Preview) Company Update (SWMA SS) (Buy)

Summary

• Swedish Match released strong Q4 results on Tuesday, giving 2021 double-digit EBIT growth in all of its businesses (excluding FX).

• In U.S. nicotine pouches, Swedish Match increased its volume share by 60 bps from Q3 to 64.4%, with strong revenue and EBIT growth.

• The Scandinavia Smokefree business continued steady growth, while U.S. Cigars had a temporary reverse in Q4 due to global supply chain issues.

• Return of capital is being stepped up, with the dividend raised 24% (to a 2.6% yield), and record buybacks in Q4; we expect more to follow.

• With shares at SEK 72.02, we expect an exit price of SEK 139 and a total return of 108% (21.9% annualized) by 2025 year-end.

Introduction

Swedish Match AB (referred here as "SWMA") released their Q4 2021 results on Tuesday (February 16). Shares rose 3.8% on the day of the results, then fell 1.6% in a down market amid rising tensions in Ukraine.

We initiated our Buy rating on SWMA in September 2020. After rising 15% by September 2021, SWMA stock fell…