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

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.