First Read Japan Tobacco: 2Q26 Results very strong (cFX EBIT +18.3%); FY26 guide raised with DPS now ¥272

Research evidence excerpt

First Read Japan Tobacco: 2Q26 Results very strong (cFX EBIT +18.3%); FY26 guide raised with DPS now ¥272

Forecast returns

Forecast price appreciation 9.5%

Forecast dividend yield 3.8%

Forecast stock return 13.3%

Market return assumption 7.8%

Forecast excess return 5.6%

Company Description

Japan Tobacco is the third largest tobacco company with a volume share in the Top 40

markets of c15% (and a market weighted share of 36%). We estimate, the company's top 5

markets (Japan, Russia, Taiwan, UK and Germany) accounted for c33%, c45% and c63% of

volume, revenue and EBIT in FY23, respectively. The company's notable brands include

Winston, Camel. Mevius and LD.

Valuation Method and Risk Statement

We use a multiples based approach to set our target prices for the tobacco companies, with

reference to factors such as volume change, organic sales growth, organisational change,

tobacco transformation, balance sheet leverage and (comparative) valuation. For JT, our

target price is based on a P/E multiple of 15.9x, applied to our FY27 UBSe adj. EPS estimate.

Company specific risks for JT include: currency (specifically JPY vs the basket of JT's major EM

currencies, of which form c45% of their sales), the deconsolidation of JT's Russian assets,

tobacco smoking prevalence rates, tobacco regulation risks (including plain packaging),

sudden changes to excise structures in key markets, and technology impact from next

generation products.

Imperial Brands:

tobacco transformation, balance sheet leverage and (comparative) valuation. For IMB, our

target price is based on a P/E multiple of 8.0x, applied to our FY27 EPS estimate, rolled

forward.

Company specific risks for IMB include: currency (specifically GBP against the EUR and/or