BofA stays at 'buy' on Imperial Brands, says 'significant value' can be unlocked

Analysts at BofA Securities maintained their 'buy' recommendation for shares of Imperial Brands following the tobacco giant's "supportive" pre-close trading update.

"We think Imperial Brands can unlock significant value by pulling the right levers by refocusing its Tobacco business, stepping up support behind Heat Not Burn and delivering efficient capital allocation," they said in a research note sent to clients.

They did concede that execution risks remained but trading on seven times their estimates for calendar year 2022 earnings per share and sporting an 8% dividend yield, they believed the risks for the share price lay to the upside.

Regarding the company's announcement of a £1bn share buyback, they noted Imperial Brands's statement that it was expected to be an ongoing multi-year feature thanks to the decline in leverage to the lower end of the company's target range.

They also welcomed the improved market share in Imperial's Top 5 markets for combustibles.

Similarly, market share gains for Heat Not Burn in Greece and the Czech Republic - together with the launch in Italy - were deemed "encouraging", the same as the positive trial results for blu 2.0 in France.

Nonetheless, they went on to add that "we would like to see much more tangible progress on reduced risk products."

BofA's target price of 2,400.0p per share was unchanged.