The UK-based tobacco manufacturer Imperial Brands PLC (GB:IMB) confirmed its FY23 guidance in its pre-close trading update, released yesterday. The company is confident of delivering its full-year numbers, driven by stable demand, increased prices, and growth in the e-cigarette market. The company also announced an additional £1.1 billion share buyback for FY24, representing a 10% increase compared to the £1.0 billion buyback in FY23.
Investors responded positively to the update, causing the shares to rise by 4.07% on Thursday. This came as a relief for the stock, which dropped on Wednesday after the UK government proposed a plan to restrict smoking and vaping among the younger generation. If enacted into law, the proposed legislation would incrementally raise the legal smoking age by one year annually. It aims to potentially eliminate smoking among young individuals almost entirely by 2040.
Imperial Brands is a prominent tobacco manufacturing company in the UK. It owns a portfolio of well-known brands such as West, Davidoff, Winston, Pulze, and iD, among others.
Trading Update
According to its update, the company remains on track to deliver its yearly numbers as forecasted. It also expects to achieve growth in its market share in its five priority markets. The company observed an improvement in net revenue growth for tobacco products in the second half of the year.
The improvement was attributed to higher prices, which helped mitigate the relatively steeper decline in volume compared to historical averages. Simultaneously, revenues from next-generation products, including vaping, oral nicotine, etc., experienced growth due to recent product launches and improved performance in Europe.
The company is anticipating single-digit percentage growth in its net turnover and adjusted operating profits for the full year. The company also confirmed that its operating profit will grow by a mid-single-digit CAGR over the next two years.
IMB will publish its full-year earnings report for FY23 on November 14, 2023.
Is Imperial Brands a Good Stock to Buy?
Analysts see this update as encouraging, considering the company’s exit from Russia and other regulatory fears.
According to TipRanks, IMB stock has a Moderate Buy rating based on three Buy and two Hold recommendations. The IMB share price target is 2,126p, which implies an upside of 30% from the current level.
