BTAFF - British American Tobacco Q2 Preview: Rich Yields And Growing Bullish Support - Reiterate Buy

2024-07-14 09:00:00 ET

Summary

• British American Tobacco's H1'24 Pre-Close Trading Update has revealed "H1 delivery in line with our expectations," with H2'24 likely to be even better.
• Much of our H2'24 optimism is attributed to the Vuse market leadership, as the management also tapped into the nicotine-free single-use vaping market in the US.
• At the same time, BTI's Velo may benefit from PM Zyn's nationwide shortage through the end of 2024, potentially triggering new growth opportunities in the oral tobacco segment.
• The stock remains inherently discounted compared to its peers, despite the New Categories growing bottom-line contribution ahead.
• With BTI set to announce their H1'24 financial results on July 25, 2024, we shall also highlight a few metrics readers may want to look out for.

BTI's Investment Thesis Remains Tempting As We Enter H2'24

We previously covered British American Tobacco p.l.c. ( BTI ) in April 2024, discussing its robust FY2023 financial metrics as the New Category segment achieved the first year of positive margins.

Combined with the growing Free Cash Flow generation, healthier balance sheet, partial monetization of its ITC stake for share repurchases, and inherent undervaluation, we believed that the stock continued to offer a compelling investment thesis across capital appreciation and dividend payouts....

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