Section 1: Company Overview and Fundamentals
1.1 Company Overview:
British American Tobacco p.l.c. (NYSE: BTI) is a consumer-centric, multi-category consumer goods company. The Company provides tobacco and nicotine products. Its segments include the United States, Asia Pacific Middle East and Africa, Americas and Europe. The Company’s product categories include Vapor, Tobacco Heating Products (THPs), Modern Oral, Traditional Oral and Combustible cigarettes.
Kalkine’s Dividend Income Report covers the Company Overview, Key positives & negatives, Investment summary, Key investment metrics, Top 10 shareholding, Business updates and insights into company recent financial results, Key Risks & Outlook, Price performance and technical summary, Target Price, and Recommendation on the stock.
Price Performance:
- BTI's share price returned approx. 4.31% in the past three months. Simultaneously, in the long term, the stock has given a return of 18.03% over the past six months.
- The stock is leaning towards the higher band of its 52-week range of USD 39.54 and 52-week low price of USD 28.25, with the current price inside an important support area of USD 33- USD 35, therefore an expectation of upward movement if the levels sustain.
- The price is currently between both its short-term (50-day) SMA and long-term (200-day) SMA, with the current RSI of 37.13, downward trending and recovering from oversold zone, with expectations of upward movement.
1.2 The Key Positives, Negatives, and Investment summary
1.3 Top 10 shareholders:
The top 10 shareholders together form ~4.91% of the total shareholding, signifying diverse shareholding. Capital International Investors and Allan Gray Proprietary Limited are the biggest shareholders, holding the maximum stake in the company at ~1.19% and ~0.88%, respectively.
1.4 Dividend payments with impressive dividend yield:
British American Tobacco p.l.c. has announced its quarterly dividends for the fiscal year ending 31 December 2023, declaring an interim dividend of 235.52p per ordinary share, payable in four equal instalments of 58.88p each in May 2024, August 2024, November 2024, and February 2025. The third payment, known as the "November 2024 Dividend," will be issued on 1 November 2024, with shareholders required to be registered on the UK main register or the South Africa branch register by the record date of 27 September 2024. This announcement underscores the Company's commitment to delivering shareholder value through a consistent dividend policy, reflecting its strong financial performance and focus on sustainable growth.
1.5 Key Metrics:
Between 2019 and 2023, BTI's revenue exhibited slight fluctuations, starting at USD 25,877 million in 2019, decreasing to USD 25,684 million in 2021, and then rising to USD 27,655 million in 2022 before settling at USD 27,283 million in 2023. Gross profit followed a similar trend, initially at USD 21,440 million in 2019, peaking at USD 22,851 million in 2022, and ultimately reaching USD 22,392 million in 2023. In terms of profitability margins, BTI's gross margin was significantly higher at 82.5% in H1 FY24 compared to the industry median of 34.4%. Furthermore, BTI demonstrated superior performance across other profitability metrics, with an EBITDA margin of 48.7% compared to the industry median of 18.1%, an operating margin of 34.5% versus 15.3%, a pretax margin of 45.4% in contrast to 8.9%, and a net margin of 37.3% as opposed to the industry median of 6.9%.
Section 2: Business Updates and Financial Highlights
2.1 Recent Updates:
The below picture gives an overview of the recent updates:
2.2 Insights of H1FY24:
Section 3: Key Risks and Outlook:
Section 4: Stock Recommendation Summary:
4.1 Technical Summary:
Price Performance:
- BTI's share price returned approx. 4.61% in the past three months. Simultaneously, in the long term, the stock has given a return of 18.03% over the past six months.
- The stock is leaning towards the higher band of its 52-week range of USD 39.54 and 52-week low price of USD 28.25, with the current price inside an important support area of USD 33- USD 35, therefore an expectation of upward movement if the levels sustain.
- The price is currently between both its short-term (50-day) SMA and long-term (200-day) SMA, with the current RSI of 37.13, downward trending and recovering from oversold zone, with expectations of upward movement.
4.2 Fundamental Valuation
Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation
Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is October 23, 2024. The reference data in this report has been partly sourced from REFINITIV.
Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.
Note 4: The report publishing date is as per the Pacific Time Zone.
Technical Indicators Defined: -
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect against further losses in case of unfavorable movement in the stock prices.
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