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1. Company Snapshot

1.a. Company Description

Imperial Brands PLC, together with its subsidiaries, manufactures, imports, markets, and sells tobacco and tobacco-related products in Europe, Americas, Africa, Asia, and Australasia.It offers a range of cigarettes, fine cut and smokeless tobacco, papers, and cigars; and next generation product (NGP) portfolio, such as e-vapour products, oral nicotine, and heated tobacco products.The company sells its products under various brands, including Davidoff, Gauloises, JPS, West, L&B, Winston, Parker & Simpson, blu, Pluze, Zone-X, Kool, Horizon, Backwoods, Skruf, Golden Virginia, Rizla, and Dutch Masters.


It also engages in the distribution of tobacco and NGP products for tobacco and NGP product manufacturers; and various non-tobacco and NGP products and services.In addition, the company is involved in the management of a golf course; distribution of pharmaceuticals, POS software, and published materials and other products; printing and publishing activities; and provision of long haul transportation, industrial parcel and express delivery, advertising, and support management services.Further, it owns the trademarks; and retails its products.


The company was formerly known as Imperial Tobacco Group PLC and changed its name to Imperial Brands PLC in February 2016.Imperial Brands PLC was founded in 1901 and is based in Bristol, the United Kingdom.

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1.b. Last Insights on IMB

Imperial Brands' recent performance has been positively driven by several factors. The company reported its performance was in line with expectations, driven by revenue growth in tobacco and next-generation products. Additionally, Imperial Brands launched a $2 billion buyback plan, which is expected to enhance shareholder value by reducing outstanding shares. Analysts have also upgraded their consensus price target to £33.19, citing increased confidence in the company's future prospects. Furthermore, the company's pricing strategy has contributed to revenue growth.

1.c. Company Highlights

2. Imperial Brands' FY '25 Results: Strong Performance and Strategic Progress

Imperial Brands delivered a robust financial performance in FY '25, with revenue growth of over 4% and an improvement of more than 9% in earnings per share. The company's cash flow was strong, supporting material increases in the underlying dividend and ongoing share buyback. The actual EPS came out at 1.2, slightly below estimates of 1.21. The company's tobacco business maintained share in priority markets while delivering strong pricing, and its NGP business recorded double-digit revenue growth. Group adjusted operating profit grew 4.6%, driven by tobacco performance, as highlighted by CFO Murray McGowan.

Publication Date: Nov -19

📋 Highlights
  • Revenue & EPS Growth:: FY '25 revenue rose 4%, with EPS up 9.1% (9.1% growth), driven by tobacco performance and operational efficiency.
  • Capital Returns:: GBP 10 billion returned to shareholders since 2021, with FY '26 plans for GBP 2.7 billion in total capital returns (GBP 1.45 billion share buyback).
  • NGP Expansion:: Next-Generation Products (NGP) revenue surged 73% over 3 years, targeting double-digit growth in FY '26, with new product launches in key markets.
  • Market Share & Efficiency:: 48 basis points aggregate market share gain in 5 years, alongside 4.6% group adjusted operating profit growth and 90–100% cash conversion.

Financial Highlights

The company's financial performance was characterized by strong revenue growth and improving profitability. Net revenue for NGP grew double-digit over the last 3 years, and the company has committed to build a meaningful NGP business over the next 5 years. The company's guidance on free cash flow is at least GBP 2.2 billion next year and up to GBP 3 billion by the end of the strategic period. With a current 'P/E Ratio' of 10.57 and a 'Dividend Yield' of 5.82%, the company's valuation appears reasonable, reflecting its stable financial performance and commitment to returning capital to shareholders.

Strategic Progress

The company has made significant progress in transforming its business, becoming more consumer-centric, simplified, and joined-up. It has assembled a team with a unique blend of broad consumer experience and deep knowledge of the markets and industry. The company has invested in consumer capabilities, technology, and data, and has equipped its people with the right skills to complete its transition. The company's NGP business has grown double-digit over the last 3 years, and it has committed to build a meaningful NGP business over the next 5 years.

NGP Business and Regulatory Environment

The company's NGP business has shown significant growth, with double-digit revenue growth recorded in FY '25. The company has a clear view of target consumers and their needs, and has launched new products to cater to these needs. The company is operating in a regulated market and has adapted well to it. The management discussed potential geographical expansion and regulatory changes, particularly in the European Union, and is in favor of thoughtful regulation that allows adult smokers to access products that help them quit smoking while preventing access to products marketed to youth.

Valuation and Outlook

With a 'P/S Ratio' of 1.46 and an 'EV/EBITDA' of 9.04, the company's valuation appears reasonable, reflecting its stable financial performance and growth prospects. The company expects to deliver low single-digit tobacco and double-digit NGP net revenue growth in FY '26, with group adjusted operating profit growth in the 3% to 5% range. Analysts estimate next year's revenue growth at 3.1%, indicating a stable outlook for the company. The company's commitment to returning capital to shareholders and its strong financial performance make it an attractive investment opportunity.

3. NewsRoom

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Tracking the Changing Narrative for Imperial Brands After Analyst Upgrades and New Buyback Plans

Nov -06

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How Analyst Sentiment Is Shifting the Story for Imperial Brands Investors

Oct -22

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UK stocks spooked by new Trump threat of fresh tariffs on China

Oct -10

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Flora Foods’ Brisby named Nomad Foods CEO

Oct -10

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FTSE 100 flat as buyback boosts Imperial Brands

Oct -07

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Imperial Brands ‘on track’ as pricing drives revenue rise

Oct -07

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Imperial Brands Says Performance in Line With Expectations, Launches $2 Billion Buyback

Oct -07

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FTSE 100 LIVE: European stocks fall and euro tumbles as French prime minister Lecornu resigns

Oct -06

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.82%)

6. Segments

Tobacco & NGP - Europe

Expected Growth: 4.5%

Imperial Brands' Next Generation Products are expected to drive growth in European markets. Strong brand portfolio and increasing demand for alternatives to traditional tobacco products will fuel growth.

Tobacco & NGP - AAACE

Expected Growth: 5.5%

Growing demand for Next Generation Products, increasing popularity in African, Asian markets, and a strong brand portfolio drive Imperial Brands’ AAACE segment growth.

Tobacco & NGP - Americas

Expected Growth: 4.6%

Growing demand for Next Generation Products, particularly in vapor and e-vapor segments, driven by increasing consumer preference for reduced-risk products and Imperial Brands’ strong presence in the Americas region.

Distribution

Expected Growth: 4.8%

Growing demand for Next Generation Products, expanding distribution network, and increasing presence in high-growth markets will fuel Imperial Brands’ growth.

Elimination

Expected Growth: 4.3%

Imperial Brands' Elimination segment's growth is driven by the company's efforts to eliminate intercompany transactions and balances, leading to improved operational efficiency and enhanced financial performance.

7. Detailed Products

Tobacco Products

Imperial Brands PLC offers a range of tobacco products, including cigarettes, fine cut tobacco, and papers.

Next Generation Products (NGP)

Imperial Brands PLC offers a range of NGP products, including e-vapour, heated tobacco, and nicotine replacement therapy.

Logistics and Distribution Services

Imperial Brands PLC provides logistics and distribution services to other companies in the tobacco industry.

Tobacco Leaf Operations

Imperial Brands PLC sources and processes tobacco leaf for use in its own products and for sale to other tobacco companies.

8. Imperial Brands PLC's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Imperial Brands PLC is moderate due to the presence of alternative products such as e-cigarettes and heat-not-burn devices.

Bargaining Power Of Customers

The bargaining power of customers is low due to the fragmented nature of the market and the lack of concentration among buyers.

Bargaining Power Of Suppliers

The bargaining power of suppliers is moderate due to the presence of a few large suppliers of tobacco and other raw materials.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the tobacco industry, including regulatory hurdles and high capital requirements.

Intensity Of Rivalry

The intensity of rivalry is high due to the presence of several large players in the industry, including British American Tobacco, Japan Tobacco, and Philip Morris International.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 61.11%
Debt Cost 5.50%
Equity Weight 38.89%
Equity Cost 6.05%
WACC 5.71%
Leverage 157.15%

11. Quality Control: Imperial Brands PLC passed 3 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

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Altria

A-Score: 8.0/10

Value: 6.8

Growth: 5.8

Quality: 7.5

Yield: 10.0

Momentum: 8.5

Volatility: 9.7

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Imperial Brands

A-Score: 7.7/10

Value: 5.8

Growth: 5.3

Quality: 6.3

Yield: 9.4

Momentum: 9.5

Volatility: 9.7

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Universal

A-Score: 7.2/10

Value: 7.8

Growth: 5.9

Quality: 4.0

Yield: 10.0

Momentum: 7.0

Volatility: 8.7

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Philip Morris

A-Score: 6.8/10

Value: 4.3

Growth: 4.1

Quality: 7.1

Yield: 8.0

Momentum: 8.5

Volatility: 9.0

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BAT

A-Score: 6.8/10

Value: 3.4

Growth: 3.6

Quality: 5.9

Yield: 9.4

Momentum: 9.5

Volatility: 9.0

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Scandinavian Tobacco Group

A-Score: 6.1/10

Value: 8.1

Growth: 4.0

Quality: 5.3

Yield: 9.4

Momentum: 1.5

Volatility: 8.3

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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

32.85$

Current Price

32.85$

Potential

-0.00%

Expected Cash-Flows