Broker snap: Nomura hails pricing ability at BATS

31st Jul 2013 10:15

Nomura has reiterated its 'buy' rating and 4,000p target price for British American Tobacco (BAT), saying that it delivered on the 'classic underlying growth profile for a tobacco company' in the first half.Organic sales rose 4.0%, operating profit was 6.0% higher and earnings per share (EPS) growth was over 10%, despite a fall in volumes."The ability of BAT to get sufficient pricing to offset that volume weakness is the sign of a well placed tobacco name, in our opinion," Nomura said."We see BAT continuing to move the dial on pricing effectively to offset inevitable volume volatilities, thanks to its geographic exposures, leadership positions and equity in the portfolio. "Coupled with the cost opportunity that continues to be steadily progressed, the outlook for underlying EPS growth of over 10% per annum plus the dividend yield of 4.5% means that a return of c15% is still offered."The broker also said that there could be additional upside if BAT can show that it is at the forefront of an E-cigarette commercialisation over the next six months. The stock was up 0.55% at 3,481.5p by 10:15.BC