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Japan Tobacco Inc 2914

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Morningstar’s Analysis

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JT's Upward Revision and Dividend Hike Positive Surprise; Supply Shortage of RRP Devices a Concern

Jeanie Chen Senior Equity Analyst

Analyst Note

| Jeanie Chen |

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.

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Company Profile

Business Description

Japan Tobacco is the third-largest tobacco company globally. It owns a rich brand portfolio including Winston (non-U.S.), Camel (non-U.S.), and Mevius, and holds leading shares in many core markets including Japan, Russia, and the U.K. It has added Logic as a vaping brand and Ploom/PloomTech heated tobacco lines into its reduced-risk-product portfolio. The tobacco business contributes 90% of group sales and nearly all profits, with more than half generated by JTI, the overseas tobacco arm. JTI was created through the acquisition of R.J. Reynolds' non-U.S. operations in 1999 and further expanded through multiple acquisitions, of which the purchase of Gallaher in 2007 was the most notable, doubling JTI’s sales. Pharmaceutical and processed food operations are the other businesses.

2-1, Toranomon 2-chome, Minato-ku
Tokyo, 105-8422, Japan
T +81 335823111
Sector Consumer Defensive
Industry Tobacco
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 64,981