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British American Tobacco PLC ADR BTI

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Morningstar’s Analysis

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Lowering British American Tobacco Valuation for Coronavirus

Analyst Note

| Philip Gorham, CFA, FRM |

British American Tobacco, or BAT, disclosed in a preclose trading update that the first half is tracking more or less in line with our expectations. The only surprise was a slightly stronger performance in the United States, where BAT has taken share. Emerging markets appear to be very challenged, however, and we are tweaking our estimates lower to account for the potential of a temporarily higher cessation rate in certain markets. Accordingly, we are lowering our fair value estimate to GBX 4,300 from GBX 4,500. Nevertheless, we continue to see significant upside to BAT and in tobacco generally, and we think both the wide moat rating and business model remain intact.

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Company Profile

Business Description

Following the acquisition of Reynolds American, British American Tobacco is neck-and-neck with Philip Morris International to be the largest listed global tobacco company--slightly larger than PMI on net revenue, but slightly smaller on volumes. British American's Global Drive Brands are Dunhill, Kent, Pall Mall, Lucky Strike, and Rothmans, and it also owns Newport and Camel in the U.S. The firm also sells vapor e-cigarettes, including its Vype brand, heated tobacco, with Glo, as well as roll- your-own and smokeless tobacco products. The company holds 31% of ITC Limited, the leading Indian cigarette-maker.

Globe House, 4 Temple Place
London, WC2R 2PG, United Kingdom
T +44 2078451000
Sector Consumer Defensive
Industry Tobacco
Most Recent Earnings Dec 31, 2008
Fiscal Year End Dec 31, 2020
Stock Type
Employees 53,761