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Japan Tobacco Inc 2914

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Stock XTKS Rating as of
JPY 4,451.00 +40.00 (0.91%)
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Company Report

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Japan Tobacco Earnings: Solid Growth Lifted by Pricing, Volume, and Weak Yen; Like to Moderate Soon

Jeanie Chen

Wide-moat Japan Tobacco was off to a good start with first-quarter results exceeding our expectations and the company’s internal targets thanks to strong pricing and solid volume growth in addition to further Japanese yen weakness. Currency-neutral core revenue grew 5.7% (reported 11.3%) year on year, while adjusted operating profits rose 3.4% (reported plus 1.5%). Pricing remains the key profit contributor, validating our investment thesis that JT’s ability to take pricing will shore up its midterm profit growth.

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Price vs Fair Value

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2914 is trading at a 398% premium.
Price
JPY 4,411.00
Fair Value
JPY 1,679.00
Uncertainty
Medium
1-Star Price
JPY 7,676.00
5-Star Price
JPY 3,116.00
Economic Moat
Dykl
Capital Allocation
Yzcwqcjv

Bulls Say, Bears Say

Bulls

Integration of the domestic tobacco business into JTI has enhanced JT’s competitive position in reduced-risk products; organizational restructuring of the domestic tobacco business also frees up some resources for RRP marketing and R&D investment.

Bears

A rapid and sizable volume decline in lucrative domestic combustible cigarette sales is unlikely to be fully offset by expansion of reduced-risk products and overseas growth.

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Trading Information

Previous Close Price
JPY 4,411.00
Day Range
JPY 4,406.00–4,462.00
52-Week Range
JPY 2,997.00–4,505.00
Bid/Ask
JPY 4,449.00 / JPY 4,450.00
Market Cap
JPY 7.90 Tril
Volume/Avg
4.1 Mil / 5.1 Mil

Key Statistics

Price/Earnings (Normalized)
14.84
Price/Sales
2.69
Dividend Yield (Trailing)
4.40%
Dividend Yield (Forward)
4.40%
Total Yield
4.41%

Company Profile

Japan Tobacco is the third-largest tobacco company globally. It owns a rich brand portfolio including Winston (non-US), Camel (non-US), and Mevius, and holds leading shares in many core markets including Japan, Russia, and the UK. It has added Logic as a vaping brand and Ploom 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 the overseas tobacco operations. JTI was created through the acquisition of R.J. Reynolds' non-US 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.
Sector
Consumer Defensive
Industry
Tobacco
Stock Style Box
Large Value
Total Number of Employees
61,432
Website
http://www.jt.com

Competitors

Valuation

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Metric
2914
IMBBY
PM
Price/Earnings (Normalized)
 14.848.3216.29
Price/Book Value
 1.963.84—
Price/Sales
 2.690.564.31
Price/Cash Flow
 12.206.5114.57
Price/Earnings
2914
IMBBY
PM

Financial Strength

Metric
2914
IMBBY
PM
Quick Ratio
 0.850.270.41
Current Ratio
 1.830.640.94
Interest Coverage
 7.263.097.42
Quick Ratio
2914
IMBBY
PM

Profitability

Metric
2914
IMBBY
PM
Return on Assets (Normalized)
 7.08%8.68%14.54%
Return on Equity (Normalized)
 12.91%46.93%—
Return on Invested Capital (Normalized)
 10.63%21.76%25.19%
Return on Assets
2914
IMBBY
PM
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