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1. Company Snapshot

1.a. Company Description

British American Tobacco p.l.c. provides tobacco and nicotine products to consumers worldwide.It offers vapour, tobacco heating, and modern oral nicotine products; combustible products; and traditional oral products, such as snus and moist snuff.The company offers its products under the Kent, Dunhill, Lucky Strike, Pall Mall, Rothmans, Camel, Newport, Natural American Spirit, being Vapour, THP, and Modern Oral brands.


It distributes its products to retail outlets.British American Tobacco p.l.c. was incorporated in 1902 and is headquartered in London, the United Kingdom.

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1.b. Last Insights on BATS

British American Tobacco's recent performance has been impacted by weak financial prospects. The company's valuation has been a concern, with a 35.8% rally year-to-date, sparking debates about its pricing. A strategic partnership aimed at expanding its reduced-risk product portfolio has garnered investor interest. However, RBC Capital downgraded the stock to Underperform, citing profit expectations. Additionally, the company suspended the US vape rollout due to regulatory pressure and faced a CFO departure.

1.c. Company Highlights

2. British American Tobacco's 2025 Results: A Year of Quality Growth

The company's financial performance in 2025 was marked by a 2.1% increase in group revenue, with adjusted profit rising 3.4%, and adjusted diluted EPS up 3.4% to 2.22, slightly below estimates of 2.25. The operating margin was broadly flat at 44%, as the company offset inflationary and FX pressures through strong U.S. performance, higher profitability in new categories, and continued cost savings.

Publication Date: Feb -13

📋 Highlights
  • Smokeless Consumer Growth:: Added 4.7 million smokeless consumers, total reaching 34.1 million, with new category contribution up 77% at constant rates.
  • Financial Performance:: Group revenue rose 2.1%, adjusted profit and diluted EPS both increased 3.4%, with operating margin stable at 44% despite inflationary pressures.
  • Productivity Savings:: Achieved £1.2 billion in savings since 2023, targeting £2 billion by 2030, with Fit to Win program expected to deliver £600M annualized savings by 2028.
  • Velo Plus Market Share:: Gained 18% volume and 14% value share in U.S. modern oral category post-launch in 2024, achieving positive category contribution within 12 months.
  • Innovation & Portfolio Shift:: Launched glo Hilo in premium heated products, showing 50% early trial-to-retention rates, aiming to strengthen glo’s performance across premium and value segments.

Segment Performance

The new category revenue grew 7%, driven by modern oral's 48% growth, but was offset by a 9% decline in vapor. The U.S. combustibles business delivered strong revenue and profit growth, driven by strengthened portfolio and sharper execution. The company's disciplined focus on quality growth improved returns on targeted investments, with new category contribution growing 77% at constant rates.

Innovation and Growth Drivers

The company is premiumizing its new category portfolio, with Velo already the clear European leader. Velo Shift, launched in Sweden, is driving incremental share in the channels where it has launched, and further market rollouts are planned through 2026. glo Hilo, the company's breakthrough innovation platform, has introduced its first piece device and is designed to establish glo in the premium segment.

Guidance and Outlook

For 2026, the company is targeting a 3% to 5% revenue growth, with a 4% to 6% operating profit and a 1% to 2% EPS growth. The company expects to deliver double-digit new category revenue growth, supported by strong enforcement and regulatory frameworks. Analysts estimate next year's revenue growth at 3.3%.

Valuation

With a P/E Ratio of 31.69 and an EV/EBITDA of 26.01, the company's valuation appears to be pricing in a certain level of growth. The Dividend Yield of 5.46% and Free Cash Flow Yield of 7.64% suggest that the company is returning value to shareholders. The Net Debt / EBITDA ratio of 6.35 indicates a relatively high level of debt, but the company's financial flexibility continues to strengthen.

Conclusion on Growth Prospects

The company's growth prospects are supported by its robust innovation pipeline and strong strategic partnerships. The company is executing with discipline and delivering against its priorities, while enhancing financial flexibility and enabling continued investment in its transformation. The goal is to migrate smokers to non-combustible products, but a level playing field is needed.

3. NewsRoom

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Tobacco-Free Kids: Over 160 Organizations Call on Formula 1 to End All Tobacco Sponsorships and Stop Promoting Addiction to Kids

12:05

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Organigram Global Inc. (OGI) Sees C$4 Target on Improved Outlook

Mar -03

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UBS Remains a Buy on British American Tobacco (BTI)

Mar -01

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British American Tobacco (BTI) Reports 2025 Revenue, Profit Growth Driven by Smokeless Categories

Feb -24

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Is It Too Late To Consider British American Tobacco (LSE:BATS) After 1-Year 64.7% Return?

Feb -23

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Weekly Roundup on the Cannabis Sector & Psychedelic Sector

Feb -23

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Organigram to Raise $65.2 Million Via BAT Private Placement Investment in Connection With Sanity Group Buy

Feb -19

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Organigram Announces C$65.2 Million BAT Private Placement Investment in Connection with the Acquisition of Sanity Group

Feb -19

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.20%)

6. Segments

United States (US)

Expected Growth: 3.5%

British American Tobacco p.l.c.’s US operations are expected to grow driven by increasing demand for e-vapor and oral tobacco products, as well as a strong brand portfolio.

Americas and Europe (AME),

Expected Growth: 4.3%

British American Tobacco's AME region is poised for growth driven by increasing demand for heated tobacco products and a growing middle class in key markets, including the Middle East and Africa.

Asia-pacific, Middle East and Africa (apmea)

Expected Growth: 5.5%

British American Tobacco’s growing presence in Asia, Middle East, and Africa is driven by increasing demand for combustible tobacco products and a shift towards Next-Generation Products, such as e-cigarettes and heated tobacco products, particularly in Asia.

7. Detailed Products

Dunhill

A premium cigarette brand offering a range of blends and flavors

Lucky Strike

A heritage cigarette brand known for its distinctive red packaging and bold flavor

Kent

A premium cigarette brand offering a range of blends and flavors, known for its innovative filter technology

Rothmans

A premium cigarette brand offering a range of blends and flavors, known for its high-quality tobacco

Vype

A range of e-liquids and vaping devices offering a convenient, smoke-free alternative to cigarettes

Vuse

A range of e-liquids and vaping devices offering a convenient, smoke-free alternative to cigarettes

glo

A heated tobacco product offering a convenient, smoke-free alternative to cigarettes

Neocore

A range of nicotine replacement therapy (NRT) products, including gum, lozenges, and patches

8. British American Tobacco p.l.c.'s Porter Forces

Forces Ranking

Threat Of Substitutes

British American Tobacco p.l.c. faces moderate threat from substitutes, as consumers have limited alternatives to traditional tobacco products. However, the growing popularity of e-cigarettes and heat-not-burn products poses a moderate threat to the company's market share.

Bargaining Power Of Customers

British American Tobacco p.l.c. has a diverse customer base, which reduces the bargaining power of individual customers. Additionally, the company's strong brand portfolio and wide distribution network limit customers' ability to negotiate prices.

Bargaining Power Of Suppliers

British American Tobacco p.l.c. has a diversified supply chain, which reduces its dependence on individual suppliers. The company's large scale of operations and strong relationships with suppliers also limit their bargaining power.

Threat Of New Entrants

The tobacco industry has high barriers to entry, including significant regulatory hurdles and large capital requirements. This limits the threat of new entrants and allows British American Tobacco p.l.c. to maintain its market position.

Intensity Of Rivalry

The tobacco industry is highly competitive, with several large players competing for market share. British American Tobacco p.l.c. faces intense rivalry from companies like Altria Group, Inc. and Japan Tobacco Inc., which can lead to pricing pressures and advertising wars.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 43.05%
Debt Cost 5.24%
Equity Weight 56.95%
Equity Cost 5.24%
WACC 5.24%
Leverage 75.58%

11. Quality Control: British American Tobacco p.l.c. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Altria

A-Score: 7.6/10

Value: 6.8

Growth: 5.8

Quality: 6.5

Yield: 10.0

Momentum: 7.0

Volatility: 9.7

1-Year Total Return ->

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Stock-Card
Imperial Brands

A-Score: 7.5/10

Value: 5.6

Growth: 5.0

Quality: 6.4

Yield: 9.4

Momentum: 9.0

Volatility: 9.7

1-Year Total Return ->

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Stock-Card
Universal

A-Score: 7.0/10

Value: 8.2

Growth: 5.9

Quality: 4.2

Yield: 10.0

Momentum: 5.0

Volatility: 9.0

1-Year Total Return ->

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Stock-Card
Philip Morris

A-Score: 6.8/10

Value: 3.8

Growth: 4.1

Quality: 7.1

Yield: 8.0

Momentum: 8.5

Volatility: 9.0

1-Year Total Return ->

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Stock-Card
BAT

A-Score: 6.7/10

Value: 3.0

Growth: 3.6

Quality: 6.1

Yield: 9.4

Momentum: 9.5

Volatility: 8.7

1-Year Total Return ->

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Stock-Card
Scandinavian Tobacco Group

A-Score: 6.5/10

Value: 7.6

Growth: 4.0

Quality: 5.4

Yield: 10.0

Momentum: 3.0

Volatility: 9.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

45.27$

Current Price

45.27$

Potential

-0.00%

Expected Cash-Flows