British American Tobacco ADR

This is our first report on global tobacco major, British American Tobacco. The company has been navigating a progressively challenging macro environment and its stock price performance has been steady. British American Tobacco is known for its dividend and yield and also for regular buybacks. The company  is making strong progress in transforming the cigarette business into a lower-risk alternative for smokers. The performance in the last quarter has been driven by all three innovative categories, with innovative product launches in all three worldwide drive brands. The company benefits from low levels of input cost inflation and high gross margins. The three global brands of the company, namely Velo, Glo, and Vuse continue to strengthen which enables the company to increase prices over the portfolio in both consumables and devices. Since 2017, R&D spending has doubled, thus accelerating the pace of innovation of the company. An added global device development center has been opened in Shenzhen. With British American Tobacco’s innovative Glo platform hyper X2, it has improved all key aspects of the company’s successful model Glo Hyper significantly. In vapor, it launched its new disposable product Vuse Go. In Velo, it has introduced recyclable cans new-to-the-word. We initiate coverage on the stock of the company with a ‘Hold’ rating.