IMB: Model update

Research evidence excerpt

IMB: Model update

Imperial Brands PLC

Target/Upside/Downside Scenarios Investment summary

The new CEO Lukas Paravicini (ex CFO) has a tough act toImperial Brands PLC

follow. Under previous CEO Stefan Bomhard Imperial has

4,000 125 Weeks 20DEC23 - 11MAY26 established a credible niche, without aspiration to overtake

3,500 the market leaders but rather to optimise its performance

3,000 as a challenger, and distribute all its free cash flow to

CURRENTCURRENTTARGETTARGET 2728.002728.002700.002700.00 shareholders. From a business perspective it has successfully

2,500 concentrated on the five key markets that generate most

2,000 profits—something the previous management neglected to

1,500 do.

1,000

15m We do not anticipate substantial change in this strategy which

10m

5m we think has been working admirably. Take it away, Lukas.

2024 2025 2026

D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M

IMB LN Rel. FT ALL SHARE INDEX MA 40 weeks Risks to rating and price target

Source: Bloomberg and RBC Capital Markets estimates for Target A later than, or smaller than, announced continuation of the

Valuation share buyback program when the current one comes to an end

would be detrimental to the shares.We believe that consumer staples stocks lend themselves

to a DCF valuation methodology owing to the relative The sector's business model is dependent on strongstrength and predictability of their cash flow together with pricing power to offset progressive volume declines. Any—in some instances—a significant mismatch between capital deterioration in that pricing power or decline in the trajectoryexpenditure and depreciation charged through the profit of volumes could be expected to have an adverse effect on theand loss account, meaning that P&L-based valuation metrics share price.