Morgan Stanley bumps up BAT price target ahead of investor update

17th Sep 2015 14:26

(ShareCast News) - Morgan Stanley upgraded its price target for British American Tobacco to 3,750p from 3,650p, keeping the stock at 'equalweight' as it took a look at the tobacco sector.MS said improved 2015 results in global tobacco reinforce its confidence in long-term targets and, despite ongoing FX pressure, should support relative valuation versus US peers.As far as British American Tobacco is concerned, the bank expects a positive message from the company at its 21-23 September investor update, highlighting the group's ongoing margin progress.The bank said BAT has delivered arguably the most consistent growth profile in global tobacco during the past several years, with 6-9% constant-currency EBIT growth supported by its strong emerging market exposure, robust pricing realisation and consistent delivery of 50-100 basis points of annual margin expansion.MS said it will also be looking for a heightened focus on BAT's diverse, consumer-led next generation products portfolio, which now includes Vypee-cigs and the Voke inhaler, and should incorporate heat-not-burn technologies by year-end.Still, the bank's preferred stocks in the sector remain Philip Morris International in the US and Imperial Tobacco in Europe, both of which it rates at 'overweight'.At 1425 BST, BAT shares were up 0.5% at 3,593p.