Imperial Brands H126 Results Meet Expectations, Maintains FY26 Growth Guidance

Overview

Goldman Sachs published an earnings review report for Imperial Brands' first half of 2026, concluding that the results were generally in line with market expectations. Management reiterated FY26 guidance, expecting low single-digit growth in tobacco business and double-digit growth in Next Generation Products (NGP). The report maintains a Buy rating with a target price of 3,550p, based on a hybrid valuation method combining DCF and P/E.

Core views

Performance: H1 26 constant currency revenue grew 1.8%, with tobacco and NGP EBIT up 1.3%, both broadly in line with consensus. Reported revenue was £3.729bn (+1% vs consensus), adjusted EBIT £1.479bn (-1% vs consensus), and EPS 128p (-1% vs consensus), affected by currency fluctuations. Guidance Reiteration: Management maintained FY26 guidance, expecting low single-digit tobacco growth and double-digit NGP growth (constant currency). Adjusted EBIT is projected to grow 3-5% (consensus +3.3%), with H2 acceleration driven by price increases, operating leverage, and improved AAACE and U.S. market performance. Currency impact on EBIT is expected to be a 0-1% headwind (consensus -0.5%). Valuation: Current share price implies 7.7x NTM P/E, below industry average. Goldman Sachs uses a hybrid valuation method (50% DCF, 50% P/E), with DCF implying £35.13/share (WACC 8.6%, terminal growth -3%) and P/E method implying £35.87/share (9.2x P/E).

Analysis framework

Goldman Sachs determined the target price using a hybrid valuation method combining intrinsic DCF value and relative valuation multiples. The DCF model is based on 8.6% WACC and -3% terminal growth, reflecting cash flow stability and long-term industry contraction. The P/E method references 9.2x NTM P/E, consistent with historical valuation range and peer comparison. The analysis focuses on H2 EBIT growth drivers including pricing strategy, operational efficiency, and regional market performance.

Methodology notes

• Valuation MethodDCF Discounted Cash Flow

  DCF Discounted Cash Flow Model

  Calculates intrinsic value by forecasting future free cash flows and discounting to present value. In this report, DCF implies £35.13/share, weighting 50% of target price.

• Valuation MethodPE/PEG valuation

  Price-to-Earnings Multiple Method

  Estimates share price by multiplying expected EPS over next 12 months by reasonable P/E multiple. This report uses 9.2x NTM P/E, implying £35.87/share, weighting 50% of target price.

Key data

• H1 26 Constant Currency Revenue Growth+1.8%In line with expectations
• H1 26 Tobacco & NGP EBIT Growth+1.3%Constant currency, in line with expectations
• H1 26 EPS128p1% below consensus
• FY26 Adjusted EBIT Growth Guidance3-5%Reiterated by management
• Target Price3,550pImplies 30.1% upside potential
• Current Valuation Multiple7.7x NTM P/EBelow industry average

Impact & implications

The report concludes that results meeting expectations and unchanged guidance should stabilize market confidence. H2 EBIT growth acceleration, if achieved, could drive valuation re-rating. Current low valuation provides margin of safety, but risks include currency volatility and deteriorating consumer environment.

Risks

• Legislative proposals restricting cigarette sales
• Weaker consumption leading to lower-than-expected volumes
• FY27 cash returns below expectations

What to watch

• Execution of H2 EBIT growth drivers
• AAACE and U.S. market performance
• Currency impact on earnings