Swedish Match: Q2 2021 Results Confirm U.S. Nicotine Pouch Potential (Preview)

Company Update (SWMA SS) (Buy)

Summary

• Swedish Match stock has underperformed last 10 months despite strong business growth, and fell again despite strong Q2 results.

• The U.S. nicotine pouch business has continued to grow volume by 10%+ sequentially, despite aggressive promotions by competitors.

• The potential in U.S. nicotine pouches is huge, based on its momentum, track record in older markets and trends in per-user consumption.

• Other businesses had stable to strong volume growth in Q2, which helped EBIT grew 15.5% year-on-year; H1 EPS grew 26.5%.

• With shares at SEK 75.24, we expect a total return of 60% (15.1% annualized) by the end of 2024, in approx. 3.5 years. Buy.

Introduction

We review our Swedish Match (referred here by its ticker "SWMA") investment case after Q2 2021 results on Tuesday (July 20).

Swedish Match has been Buy-rated in our coverage since September 2020. Shares have returned just 6.0% (including dividends) in SEK since then, a significant underperformance despite continuing strong business growth. (For…