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Japan Tobacco Inc. (JP:2914)
:2914

Japan Tobacco (2914) AI Stock Analysis

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Japan Tobacco

(OTC:2914)

Rating:71Outperform
Price Target:
¥4,897.00
▲(13.09%Upside)
Japan Tobacco's strong financial performance and positive earnings call are major strengths, driving the overall score. Technical indicators show an upward trend, though valuation concerns with a high P/E ratio present risks. The earnings call's strategic insights contribute positively despite uncertainties in certain business areas.

Japan Tobacco (2914) vs. iShares MSCI Japan ETF (EWJ)

Japan Tobacco Business Overview & Revenue Model

Company DescriptionJapan Tobacco Inc., a tobacco company, manufactures and sells tobacco products, prescription drugs, and processed foods in Japan and internationally. The company operates through four segments: Domestic Tobacco, International Tobacco, Pharmaceutical, and Processed Food. It offers tobacco products, such as cigarettes, cigars, pipe tobacco, oral tobacco, waterpipe tobacco, kretek, and fine cut products under the Winston, Camel, MEVIUS, and LD brands. The company also provides reduced-risk products, including tobacco-infused vapor and heated tobacco products, E-Vapor products, etc. under the Ploom, Logic, Ploom TECH, Ploom TECH+, and Ploom S brands. In addition, it researches and develops, manufactures, and sells prescription drugs for the therapeutic areas, such as cardiovascular, renal and metabolism, immunology, and neuroscience. Further, the company provides staple food products, such as frozen noodles and okonomiyaki, and frozen and packed cooked rice; ambient processed foods; bakery products; and seasonings, including yeast extracts and oyster sauce. Japan Tobacco Inc. was founded in 1898 and is headquartered in Tokyo, Japan.
How the Company Makes MoneyJapan Tobacco primarily generates revenue through the sale of tobacco products across various international markets. The company's key revenue streams come from its domestic and international tobacco business, with a significant portion derived from international markets, thanks to its wide portfolio of global brands. JT's pharmaceutical and processed food sectors also contribute to its earnings, although to a lesser extent compared to its tobacco operations. Strategic acquisitions and partnerships in different countries have allowed JT to expand its market presence and enhance its distribution networks, further supporting its revenue growth. The company's focus on diversifying its product offerings and entering new markets is a significant factor contributing to its financial performance.

Japan Tobacco Earnings Call Summary

Earnings Call Date:May 07, 2025
(Q1-2025)
|
% Change Since: -3.52%|
Next Earnings Date:Jul 31, 2025
Earnings Call Sentiment Neutral
The earnings call presented strong growth in the tobacco segment and promising developments in the Ploom ecosystem, offset by uncertainties and strategic shifts in the pharmaceutical business, currency impacts, and cost challenges.
Q1-2025 Updates
Positive Updates
Strong AOP Growth
AOP increased by 20.8% year-on-year on a constant FX basis, driven by the tobacco business's pricing contributions and volume growth, particularly from the Vector Group acquisition.
Tobacco Business Volume Growth
Total tobacco volume grew by 0.2% year-on-year when excluding inventory adjustments, with a significant increase in RRP and HTS volumes by 19.0% and 27.7%, respectively.
Ploom Ecosystem Expansion
Ploom HTS segment share increased by 3.6 percentage points since the end of 2022, reaching 8.2%, with plans to introduce a new Ploom ecosystem this year.
Financial Performance of Clusters
Strong pricing contributions in markets like the Philippines, Russia, and the U.K. led to core revenue and AOP growth across various regional clusters.
Processed Food Business Revenue Increase
Revenue in the processed food business increased by JPY 0.8 billion year-on-year due to price revisions and sales growth of packaged cooked rice.
Negative Updates
Pharmaceutical Business Uncertainty
Transfer of the pharmaceutical business to Shionogi due to international competition and restrictions on joint R&D activities. Profit attributable to owners is expected to decrease by approximately JPY 6 billion.
Currency Impact on AOP
Depreciation of some emerging market currencies and appreciation of cost-related currencies, such as the U.S. dollar, partially offset the positive impact from the yen depreciation.
Delivery Delays in Japan
IT system issues caused a delay in product delivery in Japan, with the financial impact still being evaluated.
Cost Increases
Higher raw material costs in the processed food business and increased amortization costs related to the Vector acquisition impacted overall profit.
Company Guidance
During the first quarter earnings briefing for 2025, JT Group provided comprehensive guidance on various metrics. The company announced the transfer of its pharmaceutical business, including Torii, to Shionogi, citing an uncertain growth outlook under the current structure and the changing environment. This move is expected to decrease the profit attributable to owners of the parent company by approximately JPY 6 billion, which will be recorded under discontinued operations from the third quarter. Despite this, the dividend for FY 2025 remains unaffected as it is based on a payout ratio calculated on a continuing operation basis. The tobacco business continues to be a core profit driver, with AOP at constant FX increasing by 20.8% year-on-year, fueled by pricing in combustibles and the inclusion of Vector Group. Total tobacco volume grew by 1.3% year-on-year, and RRP and HTS volumes saw significant year-on-year increases of 19.0% and 27.7%, respectively. Operating profit rose by 15.3% year-on-year, while profit remained stable due to higher financing costs and tax expenses. The processed food business saw a revenue increase of JPY 0.8 billion year-on-year, although AOP decreased due to higher raw material costs. Overall, the company reported a strong start to 2025 with robust top-line growth and remains on track to achieve its full-year forecast.

Japan Tobacco Financial Statement Overview

Summary
Japan Tobacco demonstrates sound financial health with strong profit margins and consistent revenue growth. The balance sheet reflects financial stability with moderate leverage. Despite a decline in free cash flow, cash generation remains robust.
Income Statement
82
Very Positive
Japan Tobacco's income statement shows a strong financial performance with a consistent increase in total revenue over the years, indicating a healthy growth trajectory. The gross profit margin for TTM is 54.92%, and the net profit margin is 14.32%, both reflecting efficient cost management. The EBIT and EBITDA margins are 21.77% and 28.38% respectively, showing solid operational efficiency. The revenue growth rate from the previous annual report to TTM is 2.75%, which is moderate but steady.
Balance Sheet
78
Positive
The balance sheet indicates financial stability with a debt-to-equity ratio of 0.44, suggesting moderate leverage. The return on equity (ROE) for TTM is 12.25%, showcasing effective management of equity capital. The equity ratio stands at 47.63%, reflecting a strong equity base. While the company maintains a substantial amount of cash and equivalents, its total assets have slightly declined from the previous period, warranting monitoring.
Cash Flow
75
Positive
The cash flow statement reveals robust cash generation capabilities with a high operating cash flow to net income ratio of 1.21. The free cash flow has decreased compared to the previous period, with a free cash flow growth rate of -14.64%. Despite this decline, the company's free cash flow to net income ratio remains strong at 0.92, indicating solid cash profitability.
Breakdown
TTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
3.24T3.15T2.84T2.66T2.32T2.09T
Gross Profit
1.78T1.74T1.62T1.57T1.37T1.19T
EBIT
704.54B697.20B672.41B653.58B499.02B469.05B
EBITDA
918.32B837.14B824.78B829.17B687.13B622.71B
Net Income Common Stockholders
463.58B179.24B482.29B442.72B338.49B310.25B
Balance SheetCash, Cash Equivalents and Short-Term Investments
809.36B1.20T1.04T904.56B721.73B557.67B
Total Assets
7.94T8.37T7.28T6.55T5.77T5.38T
Total Debt
1.67T1.78T1.14T958.31B918.62B958.88B
Net Debt
856.84B691.43B102.05B91.43B196.89B420.04B
Total Liabilities
4.08T4.52T3.37T2.93T2.89T2.78T
Stockholders Equity
3.78T3.77T3.83T3.54T2.81T2.52T
Cash FlowFree Cash Flow
428.63B502.24B445.80B384.39B495.99B411.21B
Operating Cash Flow
561.61B630.01B567.01B483.80B598.91B519.83B
Investing Cash Flow
-493.16B-439.77B-126.13B-101.82B-97.50B5.35B
Financing Cash Flow
66.20B-94.91B-270.50B-306.18B-353.14B-297.40B

Japan Tobacco Technical Analysis

Technical Analysis Sentiment
Positive
Last Price4330.00
Price Trends
50DMA
4310.28
Positive
100DMA
4102.88
Positive
200DMA
4092.32
Positive
Market Momentum
MACD
6.40
Positive
RSI
44.71
Neutral
STOCH
11.91
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:2914, the sentiment is Positive. The current price of 4330 is below the 20-day moving average (MA) of 4417.00, above the 50-day MA of 4310.28, and above the 200-day MA of 4092.32, indicating a neutral trend. The MACD of 6.40 indicates Positive momentum. The RSI at 44.71 is Neutral, neither overbought nor oversold. The STOCH value of 11.91 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for JP:2914.

Japan Tobacco Peers Comparison

Overall Rating
UnderperformOutperform
Sector (65)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
71
Outperform
$7.69T42.844.55%4.48%10.98%-63.74%
65
Neutral
$8.89B15.014.75%203.76%3.54%-2.49%
$19.84B16.337.40%2.37%
$11.63B28.114.91%3.58%
$3.93B110.982.87%0.68%
$9.93B17.027.61%2.26%
79
Outperform
¥247.88B15.30
2.44%6.87%1.26%
* Consumer Defensive Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
JP:2914
Japan Tobacco
4,365.00
-2.52
-0.06%
ASBRF
Asahi Group Holdings
13.44
1.28
10.53%
KNBWF
Kirin Holdings Company
12.85
-0.81
-5.93%
SOOBF
Sapporo Holdings
50.53
15.11
42.66%
STBFF
Suntory Beverage & Food
32.32
-2.89
-8.21%
JP:2531
Takara Holdings Inc.
1,244.00
211.17
20.45%

Japan Tobacco Corporate Events

Japan Tobacco Reports Strong Q1 2025 Financial Performance
May 7, 2025

Japan Tobacco Inc. reported its consolidated financial results for the first quarter of 2025, showing a significant increase in revenue and operating profit compared to the same period last year. The company’s revenue rose by 11.7% to 826,981 million yen, and operating profit increased by 15.3% to 248,758 million yen. Despite a slight increase in profit attributable to owners of the parent company, comprehensive income for the period saw a substantial decline. The company maintains its forecast for the fiscal year ending December 31, 2025, with expected revenue growth of 3.9% and a significant increase in operating profit by 107.4%. These results and forecasts indicate a strong operational performance and strategic positioning in the industry, with a focus on sustainable growth.

Japan Tobacco Raises Capital Through International Senior Notes Issuance
Apr 18, 2025

Japan Tobacco Inc. and its subsidiary JT International Financial Services B.V. have successfully issued senior notes in international securities markets, raising significant capital. The proceeds from these notes, which are listed on the Luxembourg Stock Exchange, will be used to repay interest-bearing debt, potentially strengthening the company’s financial position and enhancing its operational flexibility.

Japan Tobacco Announces New Bond Issuance for Debt Repayment
Apr 4, 2025

Japan Tobacco Inc. has announced the issuance of its 18th and 19th series straight bonds in Japan, totaling 70 billion yen, with terms of 5 and 10 years, respectively. The proceeds from these bonds are intended for repaying interest-bearing debt, which could impact the company’s financial structure and market positioning.

Japan Tobacco Subsidiary to Distribute USD 1.1 Billion Dividend
Mar 25, 2025

Japan Tobacco Inc. announced that its subsidiary, JT International Holding B.V., will distribute a dividend of USD 1,100 million, which will be recorded as non-operating income in JT’s non-consolidated financial statements for 2025. This dividend will not materially impact JT’s consolidated financial results, reflecting a strategic financial maneuver rather than an operational change.

Japan Tobacco Revises Financial Results Due to Litigation Losses
Mar 10, 2025

Japan Tobacco Inc. announced revisions to its 2024 full-year results and 2025 forecasts due to a retroactive provision for litigation losses of 375.6 billion yen related to its Canadian subsidiary. This adjustment impacts the company’s financial reporting and highlights the ongoing legal challenges faced by the company, potentially affecting its financial stability and stakeholder confidence.

Japan Tobacco’s Canadian Subsidiary Settles All Tobacco Claims
Mar 10, 2025

Japan Tobacco’s Canadian subsidiary, JTI-Macdonald Corp, has reached a comprehensive settlement to resolve all pending tobacco-related claims in Canada, including those from class action lawsuits dating back to 1998. The settlement, approved by the Ontario Superior Court, involves JTI-MC and its co-defendants paying a total of 32.5 billion Canadian dollars over a period of 20 to 30 years, with JTI-MC’s payments tied to its annual net income. This resolution marks the end of all smoking and health lawsuits against JTI-MC, allowing the company to focus on future operations without the burden of past legal challenges.

Japan Tobacco Revises 2024 Financial Results Due to Litigation Losses
Mar 10, 2025

Japan Tobacco Inc. has revised its financial results for the fiscal year ended December 31, 2024, to include a provision for litigation losses amounting to 375.6 billion yen due to the settlement of tobacco claims against its Canadian subsidiary. This adjustment significantly impacts the company’s financial statements, reflecting a notable decrease in operating profit and profit before income taxes compared to the previous year.

Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.