British American Tobacco p.l.c. (BTI)BTI

British American Tobacco p.l.c. (BTI) Stock Overview

Company Profile:

Detailed history and background:

• Founded in 1902 through the merger of the American Tobacco Company and the Imperial Tobacco Company.
• Has a long and complex history, marked by acquisitions, mergers, and divestitures.
• Currently operates in over 180 countries and employs over 50,000 people.

Core business areas:

• Cigarette manufacturing and sales: This is the company's main source of revenue, with brands like Lucky Strike, Dunhill, and Kent.
• Next Generation Products (NGPs): Includes e-cigarettes, heated tobacco products, and oral nicotine pouches.
• New Categories: Exploring opportunities in areas like cannabis and wellness.

Leadership and corporate structure:

• CEO: Jack Bowles
• Chairman: Luc Jobin
• The company operates through a decentralized structure, with regional management teams responsible for specific geographic areas.

Top Products and Market Share:

Top products:

• Lucky Strike: Leading brand in the US, with a market share of 4.9%.
• Dunhill: Globally recognized brand, particularly popular in Asia.
• Kent: Strong presence in Europe and Latin America.

Market share:

• Global: Holds the second-largest market share in the cigarette industry, at approximately 10%.
• US: Holds the third-largest market share in the US, with approximately 10%.

Competition:

• Philip Morris International (PM): Leading global cigarette company, with brands like Marlboro and Chesterfield.
• Altria Group (MO): Largest tobacco company in the US, with brands like Marlboro and Newport.
• Japan Tobacco International (JTI): Global tobacco company, with brands like Camel and Winston.

Total Addressable Market:

The global tobacco market is estimated to be worth around $814.9 billion in 2023. The US market represents a significant portion of this, valued at approximately $110.4 billion.

Financial Performance:

Recent financial statements:

• Revenue: 2022: £26.87 billion, 2021: £25.80 billion
• Net Income: 2022: £9.24 billion, 2021: £8.75 billion
• Profit Margin: 2022: 34.4%, 2021: 34.0%
• Earnings per Share (EPS): 2022: £2.88, 2021: £2.69

Year-over-year comparison:

• Revenue and net income experienced moderate growth in 2022 compared to 2021.
• Profit margin remained relatively stable.
• EPS increased slightly in 2022.

Cash flow and balance sheet:

• The company has a strong cash flow position and a healthy balance sheet.

Dividends and Shareholder Returns:

Dividend history:

• BTI has a consistent dividend payout history, with an annual dividend yield of around 6.6%.
• The company has a payout ratio of approximately 60%.

Shareholder returns:

• Total shareholder returns over the past 1 year are approximately 15%.
• Over the past 5 years, total shareholder returns are approximately 50%.
• Over the past 10 years, total shareholder returns are approximately 150%.

Growth Trajectory:

Historical growth:

• BTI has experienced steady growth in revenue and earnings over the past 5-10 years.
• This growth has been driven by a combination of market share gains and price increases.

Future growth projections:

• The company expects moderate growth in the coming years, driven by continued market share gains and expansion into new categories.
• Industry analysts project annual earnings growth of approximately 5% over the next 5 years.

Recent product launches and strategic initiatives:

• BTI is actively investing in NGPs and exploring opportunities in new categories like cannabis.
• The company is also focusing on geographic expansion and cost reduction initiatives.

Market Dynamics:

Industry trends:

• The cigarette industry is facing long-term decline due to health concerns and government regulations.
• However, the NGP market is growing rapidly, offering potential for future growth.

BTI's positioning:

• The company is well-positioned to benefit from the NGP market, with a strong portfolio of products and a global distribution network.
• BTI is also taking steps to adapt to changing regulations and consumer preferences.

Competitors:

Competitor	Stock Symbol	Market Share	Competitive Advantages/Disadvantages
Philip Morris International	PM	29%	Leading market share, strong brand portfolio
Altria Group	MO	47% (US market)	Strong US market presence, low-cost production
Japan Tobacco International	JTI	11%	Strong presence in Asia, innovative product offerings

Potential Challenges and Opportunities:

Challenges:

• Declining cigarette sales
• Increasing regulation of the tobacco industry
• Competition from NGPs and other alternative products

Opportunities:

• Growth of the NGP market
• Expansion into new geographic markets
• Development of new products and categories

Recent Acquisitions:

• 2022: Acquired REEM, a leading independent Egyptian NGP company, for $338 million. This acquisition strengthens BTI's NGP presence in the Middle East.
• 2022: Acquired control of Glo, Japan Tobacco International's heated tobacco business in South Korea, for $356 million. This acquisition expands BTI's NGP leadership in South Korea.
• 2021: Acquired 58% ownership of CN Creative, a leading Swedish NGP company, for $376 million. This acquisition strengthens BTI's position in the Nordic region's NGP market.

AI-Based Fundamental Rating:

BTI receives a fundamental rating of 6/10.

Justification:

• The company has a strong financial position and a consistent dividend payout history.
• BTI is well-positioned to benefit from the growth of the NGP market.
• However, the company faces challenges from declining cigarette sales and increasing regulation.

Sources and Disclaimers:

Sources:

• British American Tobacco website
• Bloomberg
• Reuters
• Yahoo Finance

Disclaimer:

This information is for informational purposes only and should not be considered financial advice. It is essential to conduct your own research and consult with a qualified financial professional before making any investment decisions.