Imperial Brands Earnings: Solid Fiscal First Half; Shares Still Undervalue Cash Flow Generation

Wide-moat Imperial Brands issued first-half fiscal 2024 results, with 2.8% adjusted operating profit growth on a constant currency basis hitting management’s guidance. The company maintained full-year guidance for tobacco and next generation products, or NGP, net revenue growth of low single digits, and companywide adjusted operating profit growth of around midsingle digits on a constant currency basis. As a result, we’re unlikely to significantly change our pre-print NGP net revenue growth and operating profit growth guidance of 1.9% and 6.2%, respectively, or our GBX 2,900 and $36 fair value estimates. Although shares were up 5% on the results, we continue to believe that the current market valuation undervalues the future cash flows of the business, providing an attractive investment opportunity.