Company Reports

Japan Tobacco, or JT, aims to achieve mid- to high-single-digit profit growth through global expansion, investment in reduced-risk products, or RRP, and optimization of its global manufacturing footprint over the mid to long run. Regaining share at home by expanding its heated tobacco lineups while continually increasing its overseas presence through combustibles and RRP will be key to attaining its target.

Wide-moat Japan Tobacco, or JT, raised dividends on the back of better-than-expected net profits, although adjusted operating profit came in a whisker below its revised full-year guidance and our forecasts. Strong pricing—a product of its moat, underpinned by brand equity of combustible cigarettes—remains the key profit driver. The results ratify our thesis that pricing will uphold JT’s profits and margins. Management guides for flat adjusted operating profits (currency neutral) or a 3.6% decline in operating profits on a reporting basis for 2024, given the weakness of the ruble. Our operating profit forecast for 2024 is a touch below guidance, given our expectation of yen appreciation.

Japan Tobacco, or JT, aims to achieve mid- to high-single-digit profit growth through global expansion, investment in reduced-risk products, or RRP, and optimization of its global manufacturing footprint over the mid to long run. Regaining share at home by expanding its heated tobacco lineups while continually increasing its overseas presence through combustibles and RRP will be key to attaining its target.

Wide-moat Japan Tobacco, or JT, again raised its sales and profit guidance thanks to better-than-expected tobacco volume and profits of the nontobacco businesses and real estate divestiture, as well as a sizable drop in trademark amortization. Continued strength in tobacco pricing has reaffirmed our investment thesis that pricing will remain the key profit growth engine to back dividend hikes. We have maintained the tobacco top-line growth assumption but again lifted our profit estimates to reflect reduced amortization assumptions as well as increased one-off profits of the property divestiture. While the adjustments leave an immaterial impact on our free cash flow projection, we marginally raise our fair value estimate to JPY 3,300 from JPY 3,200 after incorporating increased time value of money. After the recent rally, we view shares as modestly overvalued.

Japan Tobacco, or JT, aims to achieve mid- to high-single-digit profit growth through global expansion, investment in reduced-risk products, or RRP, and optimization of its global manufacturing footprint over the mid to long run. Regaining share at home by expanding its heated tobacco lineups while continually increasing its overseas presence through combustibles and RRP will be key to attaining its target.

Japan Tobacco, or JT, aims to achieve mid- to high-single-digit profit growth through global expansion, investment in reduced-risk products, or RRP, and optimization of its global manufacturing footprint over the mid to long run. Regaining share at home by expanding its heated tobacco lineups while continually increasing its overseas presence through combustibles and RRP will be key to attaining its target.

Wide-moat Japan Tobacco's second-quarter results were ahead of our expectation and its internal targets thanks to solid volume and continued pricing strength. The results again validate our thesis that strong pricing, a product of its moat underpinned by brand equity of combustible cigarettes, will bolster JT’s midterm profits. On the other hand, smokers’ downtrading in Japan and escalating price competition in the market are a renewed concern. We have brought our assumption for foreign exchange mainly for 2023 to a level in line with the updated guidance after the upward revision. The adjustments leave an immaterial impact on our fair value estimate of JPY 3,200. We view shares as fairly valued given a modest upside to our intrinsic value. Price cuts by rival British American Tobacco on its heated tobacco products could lead to intensified competition in the category and will be something to watch for in the next few months. Our profit estimates for 2023 are a touch ahead of the new guidance.

Wide-moat Japan Tobacco, or JT, was off to a good start with the first-quarter results exceeding our expectations and the company’s internal targets thanks to solid volume growth and strong pricing in addition to yen weakness. Currency-neutral core revenue grew 6.3% (15.3% reported) while adjusted operating profit rose 4.6% (reported 14.1% growth). Pricing remained the key profit driver during the quarter, echoing our investment thesis that JT’s ability to take pricing will bolster its midterm profit growth. Despite better-than-expected first-quarter earnings, with currency likely turning into a headwind and investment on the rollout of heated tobacco sticks, or HTS, rising from the second quarter, we have made no change in our forecasts of which our 2023 profit estimates are a touch below the guidance. After the recent rally possibly prompted by investors’ increasing appetite for defensive names, we view shares as modestly undervalued, indicating 9% upside to our fair value estimate of JPY 3,200.

Wide-moat Japan Tobacco, or JT, beat its full-year profit guidance and our estimates, thanks to favorable currency movement. The results again reinforce our thesis that pricing will sustain JT’s profits and margins. To our surprise, management guides for flat adjusted operating profits (currency neutral) or a 6.4% decline in operating profits on a reporting basis for 2023 despite a high comp and exchange rate uncertainty. We have raised our fair value estimate to JPY 3,200 from JPY 2,800 after adjusting our foreign exchange assumptions and rolling the forecasts to 2023. While our new intrinsic value indicates 18% upside, currency movement, the Russia ruble in particular, will be a key swing factor to its near-term profits. Over the long run, the growth prospects of reduced risk products, or RRPs, especially in the lucrative home market and Russia, remain most critical to its profit and dividend outlooks.

Japan Tobacco, or JT, aims to achieve mid- to high-single-digit profit growth through global expansion, investment in reduced risk products, or RRP, and optimization of its global manufacturing footprint over the mid- to long run. Regaining share at home by expanding its heated tobacco lineups while continually increasing its overseas presence through combustibles and RRP will be key to attaining its target.

Wide-moat Japan Tobacco's, or JT's, sizable upward guidance revision and dividend hike were the positive surprises of the third-quarter results, which included 19.3% (4.7% currency neutral) year-on-year growth in revenue and 20.7% growth (3.8% growth currency neutral) in adjusted operating profits, or AOP. The further depreciation of the yen coupled with continued strength in overseas tobacco pricing and resilience in volume are attributable to the profit upward revision. We consider some of the positive factors, such as postponed RRP (reduced risk product) investments, one-off and expect the reversed impacts will depress profits in 2023 and 2024. We have again lifted our 2022 estimates to reflect changes in our foreign exchange and volume assumptions as well as one-off income, which leaves an immaterial impact on our fair value estimate of JPY 2,800. We continue to view JT’s shares as undervalued, implying a 14% upside from the current share price.

It is not surprise that wide-moat Japan Tobacco, or JT, revised up the full-year guidance thanks to continued strength in pricing effects, resilient overseas tobacco volume, in addition to favorable currency movement. The second-quarter currency-neutral sales rose 3.6% (reported 14.8% growth) year on year with adjusted operating profits (AOP) up 11.4% (reported 22% growth). The results again validate our thesis that strong pricing, a product of its moat underpinned by brand equity, will continue to lift JT’s midterm profits. On the other hand, uncertainty surrounding Russia operations remains as management continues to evaluate options for the Russia business.

Japan Tobacco, or JT, aims to achieve mid- to high-single-digit profit growth through global expansion, investment in reduced risk products, or RRP, and optimization of its global manufacturing footprint over the mid- to long run. Regaining share at home by expanding its heated tobacco lineups while continually increasing its overseas presence through combustibles and RRP will be key to attaining its target.

Japan Tobacco, or JT, aims to achieve mid- to high-single-digit profit growth through global share gain, investment in reduced risk products, or RRPs, and positive pricing effects over the mid to long run. Regaining share at home by expanding its heated tobacco lineups while continually increasing its overseas presence through combustibles and RRPs will be key to attaining its target.

Wide-moat Japan Tobacco’s first-quarter results came in above our expectations and seem somewhat better than the company’s internal targets thanks to continued pricing strength and yen weakness against the U.S. dollar. Currency-neutral core revenue grew 3.8% (reported 6.2%) while adjusted operating profits (AOP) rose 4.5% (reported 9.4%). Pricing remains the key profit driver during the quarter, echoing our investment thesis that the firm’s ability to take pricing will bolster its midterm profit growth. Management intends to review the full-year guidance after gaining better visibility into impacts of the war in Ukraine, likely at the interim results or later. We have made no change in our forecasts, of which our 2022 operating profit estimate is 24% below the current guidance. We continue to view the shares as undervalued, indicating 12% upside to our intrinsic value of JPY 2,500.

Japan Tobacco, or JT, aims to achieve mid- to high-single-digit profit growth through global expansion, investment in reduced risk products, or RRP, and optimization of its global manufacturing footprint over the mid- to long run. Regaining share at home by expanding its heated tobacco lineups while continually increasing its overseas presence through combustibles and RRP will be key to attaining its target.

We have reduced wide-moat Japan Tobacco's fair value estimate to JPY 2,500 from JPY 2,800 following recent developments of Russia’s invasion of Ukraine. Russia, Japan Tobacco’s largest overseas market, represents an estimated 12% of group revenue and 18% of the group’s adjusted operating profits, or AOP, as of 2021. Japan Tobacco also holds a leading position with 36.7% volume share in the market as of 2021. Thus, the impact of the Russia-Ukraine war on Japan Tobacco is more notable than it is on the other Big Tobacco firms. The war is no doubt detrimental to the near-term business prospects of Russia and the region, but Japan Tobacco is unlikely to withdraw unless its long-term profitability is critically undermined. We believe reduced risk product, RRP, growth will remain a key swing factor to its midterm profitability and continue to view shares as undervalued, indicating 24% upside to the updated intrinsic value.

Japan Tobacco aims to achieve mid- to high-single-digit profit growth through global expansion, investment in reduced-risk products, or RRP, and optimization of its global manufacturing footprint over the mid to long run. Regaining share at home by expanding its heated tobacco lineups while continually increasing its overseas presence through combustibles and RRP will be key to attaining its target.

Wide-moat Japan Tobacco, or JT, beat its full-year profit guidance as expected and guides 7% growth for 2022 operating profits and dividend hikes, thanks to cost savings generated from the tobacco business restructuring. We have lifted our profit projections by 5%-10% for the explicit five-year forecast period to reflect extra savings lifted by restructuring of the Indonesia business and favorable currency movement.

Wide-moat Japan Tobacco's, or JT’s, sizable upward revision and dividend hike were a positive surprise from the third-quarter results of which it posted 10.6% year-on-year growth in sales and 14.8% growth in operating profits. Continued strength in overseas tobacco volume, favorable currency movement, postponement of PloomX launch in Russia, in addition to one-off income, contribute to a JPY 76 billion lift (equivalent to 16% year-on-year increase) in the operating profit guidance. We consider some of the positive factors one-off and expect some negatives/risks including supply shortage of Ploom X devices and a plunge in cigarillos volume and profits, in addition to delayed marketing investment will depress profits of 2022.