On Monday, Citi updated its stance on Imperial Brands (IMB:LN) (OTC: OTC:IMBBY), increasing the price target to GBP27.75 from the previous GBP24.25, while reiterating a Buy rating on the stock. The adjustment follows the company's solid financial performance for the fiscal year 2024, with expectations set for continued progress in line with its five-year strategic plan.
Imperial Brands' management is reportedly on track to meet its strategic goals, and fiscal year 2025 is anticipated to bring low single-digit organic sales growth (OSG) and mid-single-digit organic EBIT growth. Citi projects a 2.8% rise in constant currency revenue and a 4.6% increase in EBIT for the fiscal year 2025. These forecasts account for the expected decline in combustible volumes by approximately 4% to 5%, which should be balanced by a 5-6% increase in pricing.
The company's Next (LON:NXT) Generation Products (NGP) are expected to see revenues surge by over 30%, bolstered by the continued success of its product, Zone, in the U.S. market. Despite the projected higher finance and tax rates, Citi believes that the company's earnings per share (EPS) estimates will remain largely unchanged.
Citi's analysis includes a roll-forward of its discounted cash flow (DCF) model and an assumption that Imperial Brands can maintain its current price-to-earnings (PE) multiple of approximately 8.5 times. The firm's confidence in the stock is further supported by the ongoing share buyback program. The new price target of 2775 pence reflects Citi's updated valuation and the company's robust financial outlook.
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