Imperial Brands Downgraded by Jefferies as German Tobacco Tax Rises Loom

Jefferies downgraded Imperial Brands (LON: IMB) to Hold from Buy today and cut its price target to 2,700p from 3,500p. Shares in the Bristol-based tobacco and nicotine group, which owns Davidoff, Gauloises and Rizla, closed down 1.8%.

Imperial closed at 2,826p, down 53p from Friday’s 2,879p, on volume of 3.44m shares, within a range of 2,798p to 2,873p. The downgrade looked the likeliest driver of the fall, though it followed an 18.8% rally from 2,424p on the 1st of October that may also have prompted profit-taking.

The shares remain 9.6% below their 2nd of January close of 3,125p, and 17.4% above the 52-week low of 2,408p set on the 1st of October.

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The trigger was Germany’s parliament voting on Thursday to amend its Tobacco Tax Act, paving the way for sharp annual rises in excise duty, the tax charged per cigarette, from 2027 to 2030. Germany is Imperial’s second-largest market, at about 15% of group operating profit.

Jefferies estimates the average German pack could cost more than €12 by 2030, up from about €8 in 2026. It expects legal volumes to fall faster as illicit trade, meaning smuggled or untaxed cigarettes, grows, and has trimmed its 2027 forecasts accordingly.

Item	Previous	New
Rating	Buy	Hold
Price target	3,500p	2,700p
2027 combustible volumes	-1.7%	-2.7%
2027 organic sales growth	2.3%	1.5%
2027 operating profit growth	2.7%	1.4%

Jefferies’ 1.4% operating profit growth compares with the 3.5% it says consensus expects. The new target sits about 4.5% below today’s close.

The Jefferies analyst, who is not named, flagged the risk to guidance:

We detect a risk that F27 guidance could come below street estimates and see lower re-rating potential.

Jefferies

Imperial reports full-year results and 2027 guidance on the 17th of November.