• We are ceasing coverage on British American Tobacco due to a reallocation of internal resources. Our last call was NEUTRAL with a TP of MYR12.

• BAT’s 1Q23 results were below expectations. The company booked a net profit of MYR40m (-23% YoY), which only accounted for 14-15% of our and Street’s forecasts. The negative deviation could be attributed to lower- than-expected sales volumes (-24%) on the back of soft market demand – this also led to lower GPM as a result of consumer downtrading. Correspondingly, 1Q23 DPS dipped to 13 sen from 1Q22’s 17 sen.

• Our most recent recommendation was NEUTRAL with a DCF-derived TP of MYR12. Management anticipates the challenging operating landscape to persist in the near term. This takes into consideration the impact of inflationary pressures on disposable income, which BAT believes will lead to market share losses due to illicit market and consumer downtrading.

Source: RHB Research - 30 May 2023