PM - Imperial Brands: New Strategy Too Little Too Late

• Imperial Brands shares have continued to underperform peers year-to-date; the January investor day offered little reason for optimism.
• Its new Next Generation Products strategy switched focus to Heat Not Burn in Europe and reduced efforts in other categories and regions.
• Multiple competitors are expanding their Next Generation Products efforts in Imperial Brands' key markets, posing an increasing threat.
• Management expects EBIT to be flat in FY22 and improve from FY23; this will likely not happen if Heat Not Burn were to take off in Europe.
• At 1,498.0p, shares are at a 5.9x P/E, 15.4% Free Cash Yield and a 9.2% Dividend Yield – not enough given the risk of catastrophe. Avoid.

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