KUALA LUMPUR (Oct 31): British American Tobacco (Malaysia) Bhd (KL:BAT) on Friday fell sharply to a four-month low as analysts slashed their forecasts after a much weaker-than-expected quarter.
The outlook remains cloudy for the cigarette manufacturer, UOB Kay Hian said in a note, as sales volume took a hit from a slew of new regulations and compliance costs wiped off 90% of its earnings in the third quarter.
“Overall industry volumes continue to downtrend and renewed pressure by government regulators on tobacco may accelerate the timeline further,” UOB Kay Hian said.
The research house downgraded the stock to ‘hold’ from ‘buy’ and cut its target price by 44 sen to RM5.26, noting that the short-term positives are largely priced in following the recent rally.
On Friday, BAT fell as much as RM1.14 or 20% to RM4.50, its lowest since July. Since the start of 2025, shares of BAT have lost more than one-third of their value, erasing some RM770 million from their market capitalisation.
A new pictorial health warnings requirement and retail display ban required substantial preparation and investment to ensure full compliance for BAT. Sales volume of its combustible products, which was already on a downtrend, fell nearly 50%.
Further, the government raised the excise duty of cigarettes by two sen per stick, effective November, during the Budget 2026 announcement.
The tobacco sector faces mounting regulatory headwinds, Affin Hwang Investment Bank said in a note. The ban on retail display and shifting of consumer preferences towards products such as vape are accelerating the decline in legal cigarette volumes, the house said.
Affin Hwang, which has a ‘sell’ call on the stock, cut its target price to RM2.36 from RM4.
“Overall, the industry outlook remains challenging for BAT, weighed down by regulatory pressures, declining tobacco consumption, and limited near-term upside from reduced-risk products,” the house added.