Imperial Brands: Living without the wallabies – upgrade to Buy

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Imperial Brands: Living without the wallabies – upgrade to Buy

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Imperial Brands

Living without the wallabies – upgrade to

Buy

Rating Change: BUY | PO: 3,200 GBp | Price: 2,672 GBp

3-5% EBIT growth sustainable – concerns overdone 15 July 2026

We upgrade IMB to Buy from Neutral as we are confident the group will deliver its FY26 Equity

guidance of +3-5% EBIT growth (BofAe +3.2%, in line with consensus) and we see

upside to FY27 consensus (BofAe +4.4% vs +3.4%) as several one-offs are lapped, the

Key Changesdrag from high-margin Australia moderates, and cost savings continue to support EBIT.

We believe the recent share price weakness (c-13% since April) offers an attractive entry (GBp) Previous Current

point, with the stock now trading on c7.6x 12-month forward PE, down from c9x prior to Inv. Opinion A-2-7 A-1-7

the trading update on 14 April. 1H26 results were affected by temporary one-offs rather Inv. Rating NEUTRAL BUY

than a deterioration in the underlying business. Furthermore, IMB’s strong cash 2026E EPS 330.11 329.14

generation supports significant buyback capacity, underpinning an attractive c10% EPS 2027E EPS 360.16 359.87

CAGR over FY26-30, alongside a c6.5% dividend yield. 2028E EPS 401.29 399.74

2026E EBITDA (£m) 4,438.5 4,427.0

Australia drag moderating – FY27E EBIT well supported 2027E EBITDA (£m) 4,521.5 4,525.3

We think the market is underestimating just how much Australia weighed on group EBIT 2028E EBITDA (£m) 4,692.8 4,694.8

in 1H26 (2-3pp, on BofAe), following a sharp c45-65% revenue decline there (BofAe).

However, Australia is now just c1% of Tobacco & NGP sales, down from c3% in 1H25, Bastien Agaud >>

significantly reducing its negative earnings impact from here. EBIT in FY27E should also ResearchMLI (UK) Analyst