Upbeat comments from Investec saw FTSE 100-listed cigarette giant British American Tobacco (BAT) light up on Monday, lifting the tobacco sector higher in afternoon trade.

The broker reiterated its 'buy' rating for the stock this morning, hiking its price target from 3,350p to 3,800p, after the company's full-year results for 2012 released last month came in ahead of forecasts.

What's more, Investec remains confident about BAT's performance this year, with the company having already secured 80% of targeted 2013 pricing and foreign exchange looking positive compared with last year.

Shares in smaller rival Imperial Tobacco (IMT) were more or less flat, but given that BAT is nearly three times as big (on a market capitalisation basis), the tobacco sector was the best performing category of the day.

Investec said that while BAT's shares may look expensive, the stock's price-to-earnings ratio premium relative to the FTSE 100 has now fallen to 18% from a peak of 38% in August 2012.

Eight other brokers prefer BAT over IMT (rated 'hold' by Investec) while there remains no 'sellers' of BAT, analyst Martin Deboo said.

"With the market well into a rally and IMT still struggling, the most obvious downside risks look to be muted. So we choose to hunt with the pack on this one," Deboo said.


Top performing sectors so far today
Tobacco 39,615.57 +1.23%
Industrial Engineering 9,887.07 +1.05%
Fixed Line Telecommunications 3,176.84 +1.02%
Beverages 15,093.07 +0.75%
Mobile Telecommunications 4,332.35 +0.71%

Bottom performing sectors so far today
Industrial Metals & Mining 2,620.57 -3.28%
Automobiles & Parts 6,497.48 -1.77%
Software & Computer Services 1,056.78 -1.04%
Industrial Transportation 2,620.05 -0.99%
Electricity 9,234.52 -0.97%

BC

Related share prices
British American Tobacco (BATS) share price
Imperial Tobacco Group (IMT) share price