煙草業(yè)2020年展望：持續(xù)的彈性和更積極的監(jiān)管環(huán)境

1、Tobacco 2020 OutlookBeyond noise: Continued resilience & More positive regulatory environment.Into 2020 are bullish on the Tobacco sector a preference BATS. We see 3 drivers: 1) Another year of consistent earnings and cash flow supported by resilient combustibles profit growth, 2) Receding fears aro

2、und NGP disruption and more stringent US regulation, 3) Valuation appeal investors focus for value names. Our updated bottom-up analysis of the top 16 Nicotine markets continues to point to 5% industry profit growth CAGR19-25e. For 2020 we expect CC EPS growth of 5.5% even though we expect a top-lin

3、e deceleration in FY20e (3.5% vs 4.4% in FY19e) given a) tax increase in some major EMs and b) slower NGP growth (23% in FY20e vs 40% FY19e) driven by vapor deceleration. At 12x PE20e (45% EU Food/HPC/Bevs 21x), 10 x EBITDA20e (25% below vs EU Food/HPC/Bevs 14x), 7% dividend yield 20e (vs 2.4%), EU

4、Tobacco offers Value for resilient M/HSD CC EPS growth. Within our coverage, prefer BATS (OW) to PMI (N) and IMB(N).We prefer BATS (OW) to PMI (N) and IMB (N): BATS offers Value 7% CC earnings growth, continued deleveraging and positive development of US regulatory environment (on cigarettes and NGP

5、). iQOS momentum will continue to fuel PMIs outperforming 9% CC growth, though we remain Neutral given the 40% premium to Tobacco peers and tax increases in its key EMs in FY20e. Despite IMB strong underperformance (-28% 1Y vs PMI -4%, BATS +9%), the growing lag in NGP increases the risk of importan

6、t reinvestments. We Neutral given the continued resilience of EU cigarettes volume, but we will monitor iQOS progress in IMBs key Europeanmarkets.Combustibles resilient: Following strong growth in FY19e (+1.9%) to modest -2% volume decline in the EU, we expect BATS/IMB/PMI cigarettes growth to norma

7、lize to +1.1% in FY20e. The drag from 2020e tax increases in some major EMs should lead to lower volume (-4.4% -4.1% in FY19e). This should be offset by continued strong pricing (+5.8% +6.2% in FY19e) supporting profit growth.NGP steady inroads: In our March-2019 deep-dive, we flagged the exaggerate

8、d fears of the of a widespread disruption from NGP. NGP growth is slowing, owing to disappointing US vapor growth, increased regulatory scrutiny, and lower-than-expected progression of pod-based vapor systems in the EU. 2020 could a winning set up for incumbents as the industry faces PMTA submission

9、s inMay.Equity Ratings and Price TargetsEurope Equity Research06 December 2019European Consumer Goods and BeveragesCeline Pannuti, CFA AC(44-20) 7134-7123 HYPERLINK mailto:celine.pannuti celine.pannutiBloomberg JPMA PANNUTI Samuel Vialla(44-20) 7134-8804 HYPERLINK mailto:samuel.vialla samuel.viallaE

10、dward G Hockin(44-20) 7742-6937 HYPERLINK mailto:edward.hockin edward.hockinJ.P. Morgan Securities plcSector Specialist (Sales & Trading) contact detailsSophie L Warrick, CFA - Sales and Trading(44-20) 7134-1423 HYPERLINK mailto:sophie.l.warrick sophie.l.warrickTemi Ladega - Sales and Trading(44-20)

11、 7134-2654 HYPERLINK mailto:temi.ladega temi.ladegaCompanyTickerMkt Cap ($ mn)Price CCYPrice Rat Curing PrevCur Price TargetEndPrev DateDateBritish American TobaccoBATS LN88,769.56GBp2,956OWn/c3,600Dec-20n/cn/cImperial Brands PLCIMB LN21,143.75GBp1,689Nn/c1,900Dec-20n/cn/cPhilip Morris International

12、PM US128,100.90USD82.38Nn/c86.00Dec-20n/cn/cSource: Company data, Bloomberg, J.P. Morgan estimates. n/c = no change. All prices as of 05 Dec 19.See page 20 for analyst certification and important disclosures, including non-US analyst disclosures.J.P. Morgan does and seeks to do business with compani

13、es covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. HYPERLINK / Celine Pannuti, CF

14、A (44-20) 7134-7123 HYPERLINK mailto:celine.pannuti celine.pannutiEurope Equity Research06 December 2019Positive evolution of regulatory environment: In the US, we believe the removal of the nicotine regulation outweighs the risk on menthol cigarettes ban (which remains unlikely at a Federal level a

15、nd at risk of litigation at the State level). The progression of NGP regulation (May-2020 deadline, two products authorized by the FDA, General and iQOS) underlines the establishment of a more regulated NGP environment, favoring big Tobaccoplayers.Estimates change: We increase BATS EPS20e by +0.5% s

16、tronger top-line growth (+4.1% vs +3.3% earlier; given continued strong cigarettes pricing and the share uptick in US vapor) and better CC operating profit growth (+5.1% vs+4.6% earlier to US cigarettes pricing). We slightly reduce IMB EPS20e on FX. We increase PMI EPS19e/20e by +0.4%/0.6% higher to

17、p- line (+6.7%/6.3% FY19/20e vs +6.7%/5.9% earlier) higher PF Adj Op Income growth (+9.4% in FY20e vs +8.5%earlier).Celine Pannuti, CFA (44-20) 7134-7123 HYPERLINK mailto:celine.pannuti celine.pannutiEurope Equity Research06 December 2019Table of Contents HYPERLINK l _bookmark0 ExecutiveSummary4 HYP

18、ERLINK l _bookmark1 Key Conclusions How to invest in the sector? We prefer HYPERLINK l _bookmark1 BATS HYPERLINK l _bookmark2 Point 1: Resilient cigarettes growth6 HYPERLINK l _bookmark3 Point 2: Positive evolution of USregulatoryenvironment7 HYPERLINK l _bookmark4 Point 3: US Vapor - beyond ST disr

19、uption, we expect higher HYPERLINK l _bookmark4 barriers to entry HYPERLINK l _bookmark5 Point 4: Two new categories in US NGP, Modern oral and HYPERLINK l _bookmark5 Heatedtobacco HYPERLINK l _bookmark6 Point 5: Continued progression of Heated tobacco volume HYPERLINK l _bookmark6 10 HYPERLINK l _b

20、ookmark7 Point 6: M-HSD profit growth despiteNGPInvestments11 HYPERLINK l _bookmark8 Point 7: ValuationandEarnings12 HYPERLINK l _bookmark9 British American Tobacco14 HYPERLINK l _bookmark10 Imperial Brands PLC16 HYPERLINK l _bookmark11 Philip Morris International183Executive SummaryDisruption: not

21、as disruptive as the marketfeared Necessary & Welcome reset of USvaporYouthvapinguptick,Evalidiseasein2019createdanecessaryreset ofUSvaporindustry(retailvaluesales -22%since Summer2019peakasperNielsen,JPMe -5% valuedeclinein2020e).The growing regulatory oversight on vapor (May-2020 deadline) is favo

22、rable for big Tobacco players given the costs and the complexity of PMTAprocess.As of April-2019, more than 99% of the 373 PMTAs were closed as insufficient to accept or file. Only 4 PMTAs were pending for deemed products, none of them for e-cigaretteproducts.BATS flagged that, in US Vapor, the “PMT

23、A will be a significant hurdle for many current players, opening up a $1bn contestablespace.”BATSs PMTAonVuseSolovaporproducthasbeenfiledforsubstantivescientificreview inNov-2019.JTsLogicvaporproductunderreviewfollowingitsapplicationin Aug-2019(asperWSJ)Strong resilience of cigarettes in 2019eInourM

24、arch-2019deep-dive,wehadlaidoutthedriversofcigarettesrevenuegrowthresilience.Through2019,wewerepositivelysurprisedbythebetter-than-expectedcigarettesgrowth(werevised BATS/IMB/PMI average cigarettes growth for 2019e to +1.9% from +1.5% thanks to pricing) with a beat in EU cigarettes (just down -2% in

25、 9M19 despite iQOSuptick)Cigarettes resiliency is driven by a) cigarettes good affordability (excluding Australia, the UK, France), b) the rationale taxation and pricingenvironment.Weexpect+1.2%average2020-21-22egrowth(vs2013-19e+1.7%)forcigarettesrevenuepoolinTop16marketswithDM -0.3%(vs+0.8%2013-19

26、e;withvolumedecelerationdrivenbyNGP)andEM+5.1% (accelerating from 4.0% thanks to lower drag from tax increases, following strong taxes increase in EM in 2014-18).Favorable evolution of DM regulatory environmentUSCigarettes:Overall,theremovalofthenicotineregulationplanoutweighstheriskonmentholcigaret

27、tesban.Anincreaseoflegalsmokingageat21yoldatafederallevelwillrepresentJPMe1.5% volume downsiderisk.USNextGenerationProducts:May-2020deadlineandthetwoFDAauthorization(GeneralSnusMRTP,iQOSPMTA)underlinesFDAswillingnesstoauthorizeAppropriatefortheprotectionofpublic health product and the built-up of fu

28、ture higher regulatory barriers-to-entry in US NGP market.EU:ThelowertaxationofheatedtobaccoenablesPMItoincreasetheaffordabilityofiQOSsticksvscigarettes(iQOS20% cheaperthanMarlboroinmajorEU marketsvs12% inJuly-2019).BATS(OW)andPMI(N):SustainableHSDEarningsgrowth&M-HSDdividendyield HSD Earnings growt

29、hBATS&PMI continues to deliver MSD top-line growth thanks to 2%+ cigarettes growth and growth of their NGPportfolio.The profit stream from cigarettes lead to HSD EBIT growth despite continued incremental investments inNGP.Secure dividends and deleveraging underwayBATS&PMI 6.6% dividend yield 20e is

30、secured given the progress on deleveraging (BATS -0.4x to 3.6x 20e company definition) and lower payout ratio (PMI 87%20e)Divergent earnings trajectory for IMB(N) Widening lag in NGPportfolioLowertop-line: flatin 20evsBATS&PMI5%owingtolowerperformanceintobacco(+0.2%vs1.6%in20e)and laggingNGPperforma

31、nce(+3%vsBATS+38%andPMI+30%in20e)GrowinglaginNGP(weakperformanceinvaporandlimitedexposuretoHeatedtobacco)createsuncertaintyonearningstrajectorygiventhe riskofimportantNGPincremental investmentsThe c15% discount EV/EBITDA20e to BATS (7.3x vs 8.7x ex ITC) is justified given the reinvestmentrisks.We re

32、main Neutral given the continued resilience of EU cigarettes volume (Europe Tobacco & NGP represents 45% of Adj operating profit FY19), but we will monitor iQOS progress in IMBs key European markets (Germany, United Kingdom, Spain, France).Key Conclusions How to invest in the sector? We prefer BATSB

33、ATS (OW) : Best combination of value andresiliencyOur modelling leads to 7% CC EPS growth with 8% FCF growth sustaining its DPS as well as a steady deleveraging ofthebalancesheet.JPMe2.4xND/EBITDAby2022witha 5% DPS CAGR18-22E.NGP: Under current dynamics, we do not expect BATS to reachitsNGPSsalestar

34、getof5bnby2023/24;thoughthe acceleration of FDA agenda provides upsiderisks.Regulation: We do not model any impact from US regulation(mentholcigarettesandNGPMay-2020deadline) as we take the view of an unlikely impact through2025.Valuation: BATS trades at 9x PE20E (8x exITC),9.5x EV/EBITDA20E (8.5x e

35、x-ITC), 7.5% dividendyield.12%12%12%12%10%10%12%10%10%10%9%7% 7%5%0%IMB (N): NGP investment risks remainshighWe model 2% CC EPS growth (vs 5% in March-19, cut driven by slow progress in NGP and tax rate increase) below the MT 4-8% target. While management gave up the 10%+DPSgrowthpolicy,cashposition

36、remainsstretchedwith low level of FCF post dividends and slowdeleveraging.NGP: Under current dynamics, we model 290m by FY20 (below the 0.3-1.5bn target) with potential lags in technologybeingthekeyriskstoNGP.IMBhasnotyetshared details on its PMTA applications in theUS.Regulation: We do not model an

37、y impact from US regulation(mentholcigarettesandNGPMay-2020deadline) through 2025.Valuation: IMB trades at 6x PE20E, 7.5xEV/EBITDA20E, 12.5% dividendyield.Figure 2: EU Tobacco, Net Debt to EBITDAPMI (N) : Risk rewards equation notevidentPMI offers the best earnings growth (9%CAGR18-22E) given its su

38、perior combustibles portfolio and its highly profitable HTUexposure.NGP:WedonotexpectPMItoreachits90-100bnHTUtarget by 2021 (JPMe 85bn) as there is, for now, limited evidence of iQOS uptick in EM. Our NGP revenues estimates do not include MESH (vapor product)launch.Balanced risk/reward: While we exp

39、ect iQOS growth in EU tocontinuetodriveprofit,weforeseecombustiblegrowthtobe more volatile EM growth given tax increases in major EMs (Indonesia 10% of PMIs net revenues, Philippines c5%). Given the 40% premium to Tobacco peers, we remainNeutralValuation: PMI trades at 15x PE20E, 11.5xEV/EBITDA20E,

40、6% dividendyield.Figure 3: EU Tobacco, PE NTM to Europe Staples14%12%10%8%6%4%2%0%-2%-4%-2%IMBBATS5.04.03.02.01.026.024.022.020.018.016.014.012.010.0Sep-01 Oct-02 Nov-03 Dec-04 Jan-06 Feb-07 Mar-08 Apr-09 May-10 Jun-11 Jul-12 Aug-13 Sep-14 Oct-15 Nov-16Dec-17 Jan-19Sep-01 Oct-02 Nov-03 Dec-04 Jan-06

41、 Feb-07 Mar-08 Apr-09 May-10 Jun-11 Jul-12 Aug-13 Sep-14 Oct-15 Nov-16Dec-17 Jan-190%-10%-20%-30%-40%-50%-60%-70%FY16FY17FY18FY19EFY20E BATS-ND&PensiontoEBITDAIMB-ND&PensiontoEBITDAPMI - ND & Pension to EBITDADeltaEUTob.EU Staples exTob.Source: Company reports and J.P. Morgan estimates.Source: Compa

42、ny reports and J.P. Morgan estimates.Source: Datastream. Tob.: TobaccoPoint 1: Resilient cigarettes growth2019E 2% Cigarettes growth, Normalization in 2020 to 1%Figure 4: Cigarettes resilient revenues poolFigure 5: Cigarettes volume growth, EM and DMExceptional resilience in 2019Rational pricing and

43、 taxation environment led to strong price/mix(6.2%forBATS/IMB/PMIFY19evs5.4%inFY18)Volume growth came-in, overall, above our expectations, (to-12%8%4%7% 8%5%5%4% 4%7%5%6% 5% 5% 5% 5.3%4.0%EMEM1.2%EM -3.3%DM-3.6%EM Exciseimpact-3.1%DMNGPSwitch-5.3%1%1%1%1%1%1%1%-5%-4%-4%-4%-4%4.1% for BATS/IMB/PMI) d

44、riven by an improvement of volume in EMS and resilient EU cigarettes volume -2% in0%0%1%2% 2% -2.0%2019ENormalization to 1% in 2020E for BATS/IMB/PMIWhile we expected continued rational pricing behavior(5.7%-4%-3% -3% -3%-1%-5% -4%-3%-6%-4.0%-6.0%20042005200420052006200720082009201020112012201320142

45、0152016201720182019E2020E2021E2022E2023E2024E2025EFY20e for BATS/IMB/PMI), we foresee a growth normalization to 1% given tax increases in major EMs (Indonesia, Philippines, Mexico), leading to lower volume (- 4.4% in FY20e for BATS/IMB/PMI)We foresee slightly better volume in the US (-4.8%vs -5.5% i

46、n 2019E) given the lower speed of switch toNGPs.Figure 6: Quarterly cigarettes volume growth (2y average)Top 16 - Manufacturer valueTop 16 - VolumeTop 16 -PriceMixSource: Euromonitor, Company reports and J.P. Morgan estimates.Figure 7: Cigarettes affordability (Price of a pack in % of dailyDMEMTop16

47、Source: Euromonitor, Company reports and J.P. Morgan estimates.Figure 8: Cigarettes organic growth0.5%-0.2%-1.2%-2.2%-1.6%-1.7%-1.9%-2.0%GDP per capita)12.0%2008201320182023E10.0%9.0%7.0%5.0%FY17FY18FY19EFY20E7.6%-2.6%-1.9%-2.6%-2.7%-3.7%-2.9%-2.7%-2.8%-3.2%-3.1%-5.8%-5.0%-3.1%-3.1%-3.5%10.0%8.0%Cig

48、arettes remain affordable, especially in US/DE/JP (60% of cigarettes profit).7.3%8.5%6.3%6.5%3.0%5.3%5.7%5.3%5.7%6.5% 5.7%5.1%3.1%2.4%1.5%0.8%1.0%0.2%-3.7%-3.8%-4.7% -4.2%-4.4%-4.7%-1.0%-5.5%-7.5%-4.3%-5.0%-6.3%-4.8%-4.5%-6.3%-6.0%-5.2%-4.0%6.0%4.0%2.0%5.5%4.6%4.6%4.7%3.9%3.3%5.7%4.5%4.8%3.5%2.1%PMI

49、 BATSIMBPMI BATS IMBPMI BATS IMB18 Markets-2yDM-2yEM0.0%LFLVolumePriceMixSource: PMI and Altria reports.Source: Company reports and J.P. Morgan estimates.Source: Company reports and J.P. Morgan estimates.Point 2: Positive evolution of US regulatory environmentUS regulatory environment more positive

50、for Tobacco industry Three evolutions on cigarettes regulatory environment1)Nicotineregulation:theUSDepartmentofHHShasdropped its plan to reduce nicotine in cigarettes. PositiveTable 1: US Menthol ban, EBIT impact (% of Group EBIT)Menthol smokers switching to Non-mentholMenthol smokers switching to

51、Non-mentholciga75%80%85%90%95%Figure 9: US Smokers aged 18-19-20y old (m)2) 18-21yrs old: We estimate that there 1m of smokers aged 18-19-20yrs old in the US in 2018 (3% of total adult smokers). 52% of US population will be covered by the 21y legalageregulationbyendof2019.-1.5%volumeimpact3)Mentholc

52、igarettes:MassachusettsStatewillbethefirstUSBATSIMBloyalty-6%-4%-3%-2%-1%Brandswitch-14%-13%-13%-12%-12%Brandloyalty-4%-3%-2%-1%-1%BrandStatetoendthesaleofallflavoredtobaccoproducts(including menthol cigarettes) A federal ban (currently unlikely) will lead to MSD EBIT downside risk onBATS switch-3%-

53、2%-2%-1%-1%Source: Company reports and J.P. Morgan estimates. Brand loyalty: The menthol smoker switches to the non-menthol version of the menthol brand.2013201420152016201720182020: NGP Regulation to favor incumbent playersTwo major milestones in 2019 with the first MRTP(General Snus) and iQOS PMTA

54、 (first heated tobacco product authorizedasappropriateforprotectionofpublichealth) Product application deadline moved to May-2020 (vs Aug- 2022). We expect major Nicotine players to apply byMay- 2020.Table 2: Agenda of US Department of Health and Human Services (HHS)AgendaFallFall2019ProposedTobacco

55、 Product Standard for Characterizing Flavors inCigarsModified Risk Tobacco Product ApplicationsRequired Warnings for Cigarette Packages and AdvertisementsRequirements for Tobacco Product Manufacturing PracticeFall2019ProposedFall2019ProposedFall2019FinalRuleRequirements for Tobacco Product Manufactu

56、ring PracticeTobacco Product Standard for Characterizing Flavors in CigarsTobacco Product Standard for Nicotine Level of Certain Tobacco Products; Request for InformationSpring 2019ProposedSpring2019ProposedModified Risk Tobacco ProductApplicationsSpring2019ProposedRequired Warnings for Cigarette Pa

57、ckages and Advertisements Spring2019ProposedSpring2019ProposedSource: RegInfoFigure 10: Products authorized by the FDAModified Risk Tobacco Product(MRTP): Oral tobacco: General Snus authorized in Oct-2019, after TPSAC on Feb-2019 (MRTPA filed in Aug-2014)Premarket Tobacco Application(PMTA): Oral tob

58、acco: General Snus authorized inNov-2015 Heated tobacco: iQOS authorized in April-2019Substantial Equivalence(SE): Heated tobacco: BATS Eclipse authorized in July-2018Source: Company reports.Source: Monitoringthefuture and J.P. Morgan estimates.Figure 11: Pipeline of products application at the FDAM

59、odified Risk Tobacco Product(MRTP): Oral tobacco: BATS Camel Snus under review (TPSAC on Sept-2018). Altrias Copenhagen Snuff under review (TPSAC on Feb-2019) Heated tobacco: PMIs iQOS under review (TPSAC on Jan-2018). BATS Glo MRTP application scheduled for July-2020 Vapor: None Cigarettes: 22nd Ce

60、ntury Group: low-nicotine cigarette VLN under review, filed in July-2019Premarket Tobacco Application(PMTA): Oral tobacco: BATS Camel Snus under review. BATS will submit VELO. SWMA will submit ZYN. Heated tobacco: None Vapor: JTs Logic under review, application in Aug-2019 (as per WSJ), BATSs Vus So