Broker tips: Imperial Brands, Chesnara, Entain

(Sharecast News) - UBS downgraded Imperial Brands on Wednesday to 'neutral' from 'buy' and cut its price target on the stock to 3,150p from 3,500p as it pointed to limited near-term catalysts and the fact it has outperformed its tobacco peers over the last four years. UBS said competition is stepping up in the tobacco sector, including Altria's price investment in US combustibles, and British American Tobacco in nicotine pouches.

"We believe this could see Imperial's priority market share decline circa 10 basis points (versus cumulative +50bps past 4yrs), and NGP revenues grow +8% (cons +14%) in FY26," it said. "Combined with short-term headwinds (e.g., US settlement payments), we now expect FY26 cFX tobacco & NGP sales growth of +2.0% (prev +2.2%) and group EBIT of +3.5% (prev +3.9%).

UBS added that as the group likely invests to stabilise its market share, it now expects roughly +3.5% per annum FX EBIT growth to 2030.

The Swiss bank stated that while this supports capital returns of about £2.8bn a year - with buybacks driving high single digit earnings per share growth - it believes some moderation in key operating metrics and limited NGP optionality makes a further re-rating unlikely. UBS also cut its FY27 EPS estimate by 2%.

Analysts at RBC Capital Markets slightly lowered their target price on pensions and investment firm Chesnara from 370p to 360p on Wednesday, but raised its operating capital generation forecasts following the firm's FY25 earnings.

RBC Capital Markets hiked its FY26/27 OCG forecasts by 9% and 8%, respectively, reflecting Chesnara's new guidance that strengthens dividend coverage to roughly 1.8x, up from around 1.3x.

The Canadian bank said focus can now shift to growth, where balance sheet flexibility and an "extended operating footprint" had positioned Chesnara well to continue sourcing and executing value-accretive M&A, despite recent broader market volatility.

"Trading on a 12m fwd yield of 8.1%, with a sustainable dividend and potential to scale rapidly through further deals, we reiterate our 'outperform' rating," said RBC.

"Our PT decreases to 360p (from 370p), as higher cash gen and 1-yr valuation roll forward are offset by +30bps increase to our discount rate."

Peel Hunt upgraded Ladbrokes owner Entain to 'buy' from 'add' on Wednesday, stating that fundamentals at BetMGM - the bookmaker's joint venture with MGM Resorts - remain strong, even as it first quarter performance was slightly weak, with investment focused on higher return opportunities.

Peel Hunt updated its forecasts for Entain, lifting its 2026/27 adjusted underlying earnings estimates by 2% and 5%, respectively, and cutting its earnings per share estimates by 15% and 8%.

The broker said the key UK and US businesses are well placed strategically and it expects cash generation to accelerate into 2027.

"We expect more evidence of strategic progress with Entain's 1Q26, due tomorrow, 16 April, trading update," Peel Hunt said.

Peel Hunt also cut its price target on the stock to 750p from 850p based on a 2028 estimated free cash flow yield of 10%.