Nomura keeps its 'buy' rating on Imperial Tobacco (IMT.L), the broker takes back its recent earnings per share (EPS) upgrade and notes its preference for sector peer British American Tobacco (BAT).
After more severe-than-expected changes to UK tax structure - resulting in an 8% average increase in retail prices (threatening second half volumes) - and a disappointing second quarter trading update on Thursday, Nomura has reversed IMT's EPS upgrade that it made just two days ago.
Until evidence of a better second half can be demonstrated, the broker expects the stock to be lacklustre and prefers BAT ('buy') ahead of an investor event in May. IMT's target price stays at 2,415p.
Part of the slowdown in sales growth in the six months to the end of March were expected to grow by just 2%, after a 5% rise in Q4 of 2010.was due to a changing market in Spain.
The firm said Spain had continued to be a tough market due to a rise in tobacco duty in December, a ban on smoking in public places at the beginning of 2011, and the continued weakness of the economy.
the shares finished the week down 14p to close at 1,896.00 leaving plenty of upside to reach Namura´s target price of 2,415p
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