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Imperial Tobacco, the manufacturer of Golden Virginia tobacco and Lambert & Butler cigarettes, has hit the “tobacco wall”, according to Nomura, which has downgraded its rating on the stock from buy to reduce. “[The] inability to expand margin as cost efficiencies run dry and the need to support sales growth via heightened investment in brands (while suffering lower returns), we term hitting the ‘tobacco wall’,” the broker said.

Also, to reflect the absence of takeout probability in its valuation as well as the expected medium-term margin declines, the broker has cut its target price by 10% from 2,400p to 2,150p. Investec has reiterated its hold rating on drinks giant SABMiller following the group’s first half results which saw margins fall as rising raw material costs began to bite.

Earnings before interest tax and amortisation (EBITA) were up 6% at constant currency prices, although EBITA margin reduced by 10 basis points to 17.2%, which Investec said was modestly below expectations. The target price of 2,475p remains unchanged. Following its disappointing first half results, shares in Mothercare sank over 10% on Thursday morning, with Peel Hunt not helping much as it reiterated its sell rating on the stock.

“Mothercare is already in the process of closing around one third of its UK estate. We see no quick option to downsize the remaining space cheaply, while pricing needs permanent investment in our view,” said analyst John Stevenson. “We believe the outcome for 2012E… may deteriorate due to a rebasing of prices and the new strategy ‘kitchen sinking’ in the first half of 2012 calendar year,” he said. With the potential for UK losses to widen further, Peel Hunt remains a seller with a target price of 150p.