Operating Margin - Japan Tobacco Inc (F:JAT)

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Price: 31.29 EUR 0.1%

Market Cap: 55.6B EUR

12.8%

Current

20%

Average

10.9%

Industry

Operating Margin represents how efficiently a company is able to generate profit through its core operations.

Higher ratios are generally better, illustrating the company is efficient in its operations and is good at turning sales into profits.

Operating Margin

12.8%

Operating Profit

435B

Revenue

3.4T

Operating Margin Across Competitors

Country		Company	Market Cap	Operating Margin
JP		Japan Tobacco Inc TSE:2914	10.3T JPY	13%
US		Philip Morris International Inc NYSE:PM	253.1B USD	39%
UK		British American Tobacco PLC LSE:BATS	89.1B GBP	14%
US		Altria Group Inc NYSE:MO	96.6B USD	52%
IN		ITC Ltd NSE:ITC	4.2T INR	29%
UK		Imperial Brands PLC LSE:IMB	24.3B GBP	11%
SE	S	Swedish Match AB F:SWMC	15.2B EUR	41%
KR		KT&G Corp KRX:033780	15.3T KRW	20%
CN		Smoore International Holdings Ltd HKEX:6969	73B HKD	13%
ID		Hanjaya Mandala Sampoerna Tbk PT IDX:HMSP	91.3T IDR	8%
IN		Godfrey Phillips India Ltd NSE:GODFRYPHLP	324.4B INR	17%

Japan Tobacco Inc
Glance View

Market Cap

55.6B EUR

Industry

Tobacco

Japan Tobacco Inc. (JT) stands as a formidable player in the global tobacco industry with a rich legacy that extends well beyond Japan's borders. Originally formed from the government's domestic monopoly on tobacco, JT was privatised in 1985, marking a new chapter as it aimed to compete on the world stage. This transformation was not merely cosmetic; it involved expanding its horizons through strategic acquisitions, most notably in markets like the United States with its purchase of R.J. Reynolds' non-U.S. operations, and Europe, where it gained a foothold with the acquisition of Gallaher Group. Such expansions illustrate JT’s approach to growth: leveraging established international brands like Winston, Camel, and LD, alongside cherished local products. This dual positioning has enabled JT to adapt to varying consumer tastes and regulatory environments, thus securing its place as one of the top global cigarette manufacturers. While its core business remains deeply rooted in tobacco, Japan Tobacco has ingeniously diversified its operations—welcoming the challenges and opportunities of the 21st-century consumer market. JT’s diversification into pharmaceuticals, processed foods, and beverages represents an insightful strategy to mitigate risks associated with the declining global smoking rates and intensifying regulations. By investing in harm reduction technologies, JT seeks to evolve with the industry trends toward reduced-risk products, such as heated tobacco and e-cigarettes. The company balances its deep traditional roots with innovative strides, managing market dynamics through a comprehensive portfolio that generates significant revenue and ensures sustained profitability. This adaptability and nuanced approach to expansion illustrate JT's resilience in an era of shifting consumer preferences and regulatory landscapes.

View JAT Analysis

JAT Intrinsic Value

What is Intrinsic Value?

Economic Moat is a concept popularized by Warren Buffett to describe a company's durable competitive advantage. It represents the 'moat' that protects a company from competitors and helps it sustain profitability over the long term. Our analysis of the past 10 years showed that companies with a wide economic moat significantly outperformed the market, delivering +645% returns compared to +189% for the S&P 500.

Our research into Economic Moat performance spans the past 10 years and focuses on companies with a wide economic moat. For this analysis, we calculated the average stock price returns of these companies, comparing them to the performance of the S&P 500 index over the same period.

The results were compelling: wide moat stocks achieved a remarkable +645% average return, compared to +188% for the broader market. This difference highlights the long-term benefits of investing in businesses that can maintain their market position and pricing power over time.

Note: This research does not account for survivorship bias. Past performance is not indicative of future results.

Determining whether a company has an economic moat requires both a deep dive into financial metrics and a qualitative assessment of its competitive position. Our analysts conduct a rigorous evaluation that focuses on identifying structural advantages that enable a company to sustain profitability and defend its market share over the long term.

The process begins with an analysis of a company’s historical financial performance. We assess how consistently the company has generated returns above its cost of capital and whether those returns have been stable or improving. However, financial performance alone doesn’t reveal the full picture. To understand the sources of these advantages, we evaluate five key drivers of economic moats:

Network Effect: We analyze whether the value of a company’s product or service grows as its user base expands. Platforms like payment systems or marketplaces benefit from this self-reinforcing.

Switching Costs: We assess whether customers face significant costs or disruptions when switching to a competitor’s product or service. High switching costs create customer stickiness and provide pricing power.

Intangible Assets: Strong brands, patents, and regulatory licenses can protect a company’s market position by creating barriers for competitors or enabling premium pricing. For example, a well-recognized consumer brand may command higher customer loyalty and margins.

Efficient scale: Occurs when a market is optimally served by one or a few players, making it unprofitable for new entrants to compete. This typically happens in industries with high fixed costs or geographic constraints, such as utilities or pipelines.

Cost Advantage: Companies with structural cost advantages can produce goods or services at a lower cost than their competitors, enabling them to offer competitive pricing or maintain higher margins. These advantages often arise from economies of scale, superior supply chain management, or proprietary technology. Firms like Walmart leverage their massive scale to negotiate better terms with suppliers, allowing them to undercut competitors on price.

By examining these factors in combination with a company’s financial performance and market positioning, we classify each company into one of three categories:

This rigorous evaluation ensures that our moat ratings are both comprehensive and reliable, giving investors the tools they need to make well-informed, long-term decisions.

The AI Assistant may sometimes provide inaccurate information.

Make your own investment decisions or consult a licensed financial advisor.

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Japan Tobacco Inc
F:JAT