Citi says decline in smoking will hit Altria, downgrades stock

KT&G

16/03/2021 14:36

** Altria shares  MO.N  down ~1% at $49.37 after Citigroup
downgrades tobacco firm to "neutral" from "buy", citing possible
hit from decline in smoking
    ** In an update to its report "What if the last smoker quits
in 2050?" from a decade ago, Citi says downtrend has continued
    ** Cigarettes may disappear before 2050 especially in U.S.,
large parts of Europe, Australia and chunks of Latam - Citi 
    ** Says Altria has 82% of economic exposure to U.S.
cigarettes
    ** Altria's U.S. market share in reduced risk products
(RRPs) is ~15%-20%, way below its 50% market share in
traditional tobacco - Citi
    ** Citi sees possible aggressive competition from Philip
Morris  PM.N  if U.S. growth of Altria's IQOS smoking device
slows and PM buys Swedish Match  SWMA.ST  
    ** Brokerage reinforces "buy" rating on PM, British American
Tobacco  BATS.L  and KT&G  033780.KS  based on exposure to RRPs
and retains "neutral" rating on Imperial Brands  IMB.L  and
Japan Tobacco  2914.T  
    ** Broadly, Citi thinks tobacco stocks are undervalued and
is "very bullish" on cos growing their RRP business rapidly 
    ** S&P 500 tobacco index  .SPLRCTOBC  up 11% YTD after 8.9%
drop in 2020 vs 5.8% rise in S&P 500  .SPX  YTD following 16.3%
gain last year 

 (Reporting by Sruthi Shankar in Bengaluru)
 ((sruthi.shankar@thomsonreuters.com;))