Analysts forecast margin pressure and lower EPS but maintain 'buy' with 4,900p target
Deutsche Bank has reiterated its 'buy' rating on British American Tobacco PLC (LSE:BATS) ahead of full-year results, forecasting a modest organic revenue rise but a dip in reported earnings as the group navigates a changing regulatory and competitive landscape.
Analyst Damian McNeela expects revenue to fall 1.6% on a reported basis to £25.45bn for the 2025 financial year, though to rise 2.0% organically.
Adjusted profit from operations is forecast to decline 1.3% to £11.22bn, with group margins falling around 190 basis points to 44.1%. Adjusted diluted earnings per share are expected to drop 3.1% to 330.7p, below consensus estimates of 338.5p.
Deutsche forecasts adjusted net debt to rise by £665m to £31.25bn, equivalent to 2.6 times EBITDA.
The bank sees five main areas of investor focus ahead of the results. The first is performance in the New Categories division, where Deutsche forecasts 6.6% constant currency growth, supported by momentum across all three platforms.
Management’s ability to sustain mid-single-digit growth over the medium term will be closely watched.
Second is the outlook for the Combustible segment, particularly in the US deep discount market. Deutsche notes that investors will look for detail on Doral’s performance, the impact of the double duty drawdown and broader pricing dynamics.
Third, attention will centre on early signs of traction for Glo Hilo, a recent heated tobacco launch in Japan, Italy and Poland. Any commentary on market share gains or additional market rollouts will be key.
Fourth, the bank expects a detailed update on VELO, including user growth, retention and expansion into new geographies such as the UK.
Finally, Deutsche expects commentary on the regulatory environment in the US, particularly concerning illicit vapes, to be closely parsed.
Despite expected declines in headline metrics, the German bank maintains its 4,900p target, arguing that valuation remains compelling at current levels. British American Tobacco shares rose 0.8% to 4,531p.