Summary of the Conference Call on Smoore International Industry Overview - The global tobacco market is substantial, nearing $900 billion, but the traditional cigarette market is experiencing a slight decline with a compound annual growth rate (CAGR) of -0.2% over the past decade, excluding the Chinese market [2][3] - New tobacco products, including electronic vapor products, heated not burned (HNB) products, and oral nicotine pouches, are driving overall market growth [2] Key Points on New Tobacco Products - New tobacco products are categorized into three main types: electronic vapor products, HNB, and oral nicotine pouches [5] - Electronic vapor products saw rapid growth but have faced a downturn since 2021 due to tightening regulations [5] - HNB products, pioneered by Philip Morris in 2014, have experienced a slowdown in growth to mid-low double digits due to regulatory pressures in Europe [5] - Oral nicotine pouches have low penetration but are growing rapidly, maintaining high double-digit growth rates [5] Smoore International's Position and Strategy - Smoore International has a long history in the electronic vapor product sector and is currently focusing on the HNB segment [2][6] - Despite European regulatory impacts, HNB products are expected to maintain a growth rate of 10% to 15%, with potential boosts from market openings in the U.S. and China [6][7] - The Glo Halo product, developed in collaboration with major clients, is positioned to enhance market share due to its competitive advantages [2][6] Market Share Insights - The global HNB market is dominated by Philip Morris's IQOS, holding over 70% market share, while Smoore and its clients account for approximately 15% [2][6] - As new products are launched and iterated, the market share gap is expected to narrow [2][6] Financial Performance and Future Outlook - In the first half of 2025, Smoore's ODM business performed well, particularly in light of the European ban on disposable e-cigarettes [4][7] - HNB products are set to launch nationwide in Japan, a key market accounting for one-third of global HNB sales, following positive trial feedback [7] - The projected price-to-earnings (PE) ratios for 2025 to 2027 are 95x, 60x, and 42x respectively, indicating high valuation but justified by industry prospects and Smoore's R&D capabilities [4][7] Competitive Landscape and Future Trends - Currently, the three forms of new tobacco products do not compete directly, as they cater to different harm reduction needs [8] - Each product type offers unique value propositions, ensuring their coexistence and collective contribution to market growth [8]

Summary of Conference Call Notes Industry Overview - The Japanese HNB (Heated Not Burned) market has a global penetration rate of 43% in 2024, significantly higher than other countries, indicating substantial growth potential in the new tobacco market [1][3] - The global traditional cigarette market has an HNB penetration rate of less than 6%, highlighting the early development stage of this category [1][8] Market Dynamics - The Japanese new tobacco market is characterized by a "one leader, two strong" structure, with Philip Morris International (PMI) holding a 70% market share, followed by British American Tobacco (BAT) and Japan Tobacco with 15-16% and 14% respectively [1][4] - BAT has shifted some resources from its Hyper product line to Hilo, which is positioned in the high-end market, competing directly with PMI's IQOS [1][10] Product Launch and Promotion - Smoore International launched its new product in Miyagi Prefecture, a region with a high HNB penetration rate of 56%, facilitating product education and promotion [1][5] - The new products are prominently displayed in major convenience stores in Sendai, indicating successful initial promotion [1][5] Product Differentiation - Major brands in Japan have distinct product design philosophies: Japan Tobacco's Pro series uses low-temperature heating, PMI's IQOS is mid-range, and BAT's GLO Helo series targets high-temperature, high-volume consumers [1][6] Global Market Comparison - Other countries lag in HNB development, with penetration rates of 20% in Italy, 18% in South Korea, 16% in Ukraine, and 14% in Poland [1][7] Sales and Distribution - Convenience stores like Seven Eleven have effectively distributed tobacco products, with BAT's PROOM series occupying prime shelf space [1][9] Future Plans and Market Strategy - Smoore plans to fully launch its new products in Japan on September 1 and enter the European market by the end of the year, aiming to validate repurchase rates and consumer acceptance [1][14] - BAT aims to increase its new tobacco revenue share to over 50% within the next decade, reflecting a positive market outlook [1][18] Regulatory and Competitive Challenges - The high entry barriers in the new tobacco industry, coupled with recent regulatory changes in China prohibiting HNB production, pose significant challenges for new entrants [1][17] - Investors should monitor product sales feedback and industry dynamics, as Smoore's competitive advantage is supported by high industry barriers and BAT's brand channel support [1][2][15] Investment Outlook - Investors are encouraged to evaluate the new tobacco industry trends and competitive landscape, as there are positive signs in the Japanese market within a short promotional period [1][20]

Investment Rating - The report maintains an "Outperform" rating for the industry [3] Core Insights - The report highlights that major companies in the home furnishing sector, such as Gujia Home and Xilinmen, have reported Q2 results that slightly exceed market expectations, indicating a potential recovery in market sentiment towards home furnishing valuations [2][5] - The packaging paper prices have shown a slight recovery since August, with the upcoming peak season expected to boost demand for recycled paper [2][5] - The electronic cigarette sector, particularly companies like Smoore International, is benefiting from stricter regulations in the US and a recovery in Europe, leading to stable revenue and profit growth [2][5] Summary by Sections Home Furnishing - Gujia Home reported a Q2 revenue increase of 7.2% year-on-year and a net profit increase of 5.4%, with a 50%+ growth in functional product retail for H1 [5] - Xilinmen's Q2 revenue grew by 4.3% year-on-year, with a net profit increase of 22.4% [5] - The report suggests that many home furnishing companies are currently valued at historical lows, presenting an opportunity for valuation recovery [5] Paper and Packaging - As of August 22, 2025, the prices for various paper types are as follows: double glue paper at 4925 CNY/ton (-25 CNY), copper plate paper at 5110 CNY/ton (-40 CNY), and box board paper at 3484.2 CNY/ton (+29.2 CNY) [5][51] - Nine Dragons Paper is expected to report a profit of approximately 2.1 to 2.3 billion CNY for FY2025, a year-on-year increase of 165% to 190% [5][5] - The report emphasizes the importance of companies with well-structured capacity and sufficient fiber supply, such as Nine Dragons Paper and Shanying International [5] Consumer Goods - The report notes that Steady Medical achieved a revenue of 5.3 billion CNY in H1 2025, a year-on-year increase of 31.3%, with a net profit of 490 million CNY, up 28.1% [7] - The consumer goods sector is seeing strong growth in high-end medical supplies and personal care products [7] Export Chain - Home Depot reported Q2 2025 revenue of 45.3 billion USD, a nearly 5% year-on-year increase, slightly below market expectations [5] - The report indicates a positive trend in large orders, with transactions over 1000 USD increasing by 2.6% year-on-year [5] New Tobacco Products - Smoore International's H1 revenue reached 6 billion CNY, a year-on-year increase of 18.3%, with a focus on ODM and proprietary brand businesses [5][9] - The report suggests that the new tobacco product market is expected to grow as international tobacco companies launch HNB products [9]

Core Viewpoint - The company reported a revenue of 6.013 billion yuan for the first half of 2025, marking an 18.3% year-on-year increase, while net profit decreased by 28.0% to 492 million yuan [1] Financial Performance - Revenue for H1 2025 reached 6.013 billion yuan, up 18.3% year-on-year [1] - Gross profit was 2.244 billion yuan, a 16.6% increase, with a gross margin of 37.3%, down 0.5 percentage points [1] - Net profit fell to 492 million yuan, a decrease of 28.0%, while adjusted net profit was 737 million yuan, down 2.1% [1] - Adjusted net profit margin stood at 12.3%, down 2.5 percentage points year-on-year [1] Segment Performance - Self-owned brand revenue from electronic vapor products and vapor beauty products was 1.274 billion yuan, up 14.1%, accounting for 21.2% of total revenue [1] - Revenue from the European and other regions was 1.069 billion yuan, a 15.1% increase, driven by the strong performance of the VAPORESSO brand [2] - The U.S. market revenue was 174 million yuan, down 6.7%, while the Chinese market saw a significant increase of 2595.2% to 30.618 million yuan, mainly from the "岚至" brand [2] - Revenue from enterprise clients was 4.739 billion yuan, up 19.5%, making up 78.8% of total revenue [2] Regulatory Environment - Increased enforcement against non-compliant products in the U.S. has been noted, with the FDA and CBP seizing over 135 million USD worth of illegal e-cigarettes [2] - In Europe, several countries have imposed restrictions or bans on disposable e-cigarettes, with the UK implementing a sales ban on June 1, 2025 [2] R&D and Future Growth - The company successfully supported the launch of the high-end HNB product Hilo series, set to be released in Japan in September 2025 [3] - The vapor medical subsidiary is developing leading asthma and COPD products for the U.S. and European markets, aiming for greater revenue contributions [3] - The "岚至" home beauty device has surpassed 10,000 users, and the professional equipment has received Class II medical device certification [3] - R&D expenditure for H1 2025 was 723 million yuan, down approximately 4.9%, representing about 12.0% of revenue [3] Profit Forecast and Investment Outlook - The company is expected to benefit from increased market concentration due to stricter regulations, with significant contributions from HNB business anticipated from 2026 [3] - Adjusted net profit forecasts for 2025-2027 are 1.472 billion, 1.979 billion, and 2.663 billion yuan, respectively, with year-on-year growth of 34.40% and 34.60% in 2026 and 2027 [3]

Group 1: Financial Performance - In the first half of 2025, the company achieved revenue of 6.013 billion yuan, a year-on-year increase of 18.3%, aligning with forecast values and exceeding early-year high single-digit expectations [1] - The net profit was 492 million yuan, a year-on-year decrease of 28.0%, which is the midpoint of the forecast range, attributed to increased management expenses and legal compliance costs [1] - Adjusted net profit was 737 million yuan, a year-on-year decline of 2.1%, also within the forecast range [1] - The company's gross margin for H1 was 37.3%, a decrease of 0.5 percentage points year-on-year, while the adjusted net profit margin was 12.3%, an increase of 2.5 percentage points year-on-year [1] Group 2: Business Segments - The self-owned brand business generated revenue of 1.274 billion yuan in H1, a year-on-year increase of 14.1%, with European revenue growing by 15.1% [1] - The To B business revenue was 4.739 billion yuan, a year-on-year increase of 19.5%, with European revenue rising by 38.0% [2] - The HNB market is experiencing rapid growth, with the company collaborating with British American Tobacco on the HNB product gloHilo, which received positive feedback during trials in Japan [2] Group 3: Market Outlook and Projections - The company is adjusting its profit forecasts due to the impact of incentive amortization and other expenses, projecting net profits of 1.33 billion, 2.22 billion, and 2.89 billion yuan for 2025-2027 [3] - The company maintains a "buy" rating, with projected P/E ratios of 100, 60, and 46 for the respective years [3]

Core Viewpoint - Smoore International, the world's largest electronic vapor product manufacturer, reported a revenue of 6.013 billion RMB for the first half of 2025, an increase of 18.3% year-on-year, while adjusted net profit decreased by 2.1% to 737 million RMB [1] Group 1: Financial Performance - The company proposed an interim dividend of 0.20 HKD per share, with a payout ratio increasing to 225.1%, compared to approximately 38.7% in the same period of 2024 [1] - The self-owned brand business generated approximately 1.274 billion RMB in revenue, a year-on-year increase of about 14.1%, accounting for approximately 21.2% of total revenue [1] Group 2: Brand and Market Performance - The self-owned brand "Lanzhi" in mainland China generated approximately 31 million RMB in revenue, showing a significant year-on-year growth of about 2595.2% [2] - The "Lanzhi" home beauty device has surpassed 10,000 users, and the professional equipment has received Class II medical device certification, being adopted by over 100 private institutions [2] Group 3: Business Segments - The To B (business-to-business) segment recorded revenue of approximately 4.739 billion RMB, a year-on-year increase of about 19.5%, driven mainly by the recovery of the electronic vapor business [2] - The company successfully supported key clients in launching a series of innovative compliant products in response to regulatory changes in the European market, leading to strong order growth [2] Group 4: Research and Development - The company focused on enhancing R&D efficiency, prioritizing investments in heated non-combustible (HNB) products and vapor medical applications, achieving several breakthroughs in R&D [3] - A significant milestone was the successful support of a strategic client in launching a high-end HNB product series in key markets, with plans for a nationwide launch in Japan by September 2025 [3] Group 5: Future Outlook - The company aims to continue leveraging technological innovation as a foundation, focusing on electronic vapor, heated non-combustible, special-purpose vapor products, vapor medical, and vapor beauty sectors to provide comprehensive vapor technology solutions [3]

Group 1 - The core viewpoint of the report indicates that Smoore International's revenue increased by 18% year-on-year in the first half of the year, while net profit after tax decreased by 2.5%, which is roughly in line with expectations [1] - The company is expected to see a slight improvement in revenue growth for the full year, but profit margins are anticipated to remain under pressure [1] - Due to the weak profitability of Smoore International, the earnings per share estimates for the next two years have been lowered by 5% and 10%, respectively, and the target price has been reduced by 6% to HKD 8.7, maintaining an "underperform" rating [1]

Core Viewpoint - Smoore International (06969) experienced a significant stock price fluctuation, initially rising over 8% before closing up 6.25%, but later fell by 5.88% to HKD 22.08 with a trading volume of HKD 683 million [1] Financial Performance - For the first half of 2025, Smoore International reported revenue of RMB 6.013 billion, representing a year-on-year increase of 18.3% [1] - Adjusted profit for the period was RMB 737 million, a decrease of 2.1% year-on-year [1] - Net profit for the period was RMB 492 million, reflecting a significant year-on-year decline of 27.96% [1] Dividend Announcement - In celebration of the company's fifth anniversary since its listing, the board declared an interim dividend of HKD 0.20 per share for the six months ending June 30, 2025, compared to HKD 0.05 per share in the same period last year [1] Analyst Insights - According to a report from Bank of America Securities, the company is expected to see a slight improvement in annual revenue growth, but profit margins are anticipated to remain under pressure [1]

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The company is experiencing a recovery in the European electronic vaporization market, and the HNB (Heat-not-Burn) segment is expected to release profit elasticity [8] - The company's revenue for the first half of 2025 reached 6.013 billion yuan, a year-on-year increase of 18.3%, aligning with forecast values and exceeding initial high single-digit expectations [8] - The HNB market is in a rapid growth phase, with the company collaborating with British American Tobacco on new products, indicating potential for future profit contributions [8] Financial Summary - Total revenue projections for the company are as follows: - 2023A: 11.177 billion yuan - 2024A: 11.799 billion yuan - 2025E: 13.722 billion yuan - 2026E: 16.166 billion yuan - 2027E: 18.395 billion yuan - Year-on-year growth rates are projected at (8.06)%, 5.56%, 16.30%, 17.81%, and 13.79% respectively [1] - Net profit attributable to the parent company is forecasted as: - 2023A: 1.645 billion yuan - 2024A: 1.303 billion yuan - 2025E: 1.329 billion yuan - 2026E: 2.217 billion yuan - 2027E: 2.891 billion yuan - Year-on-year growth rates are projected at (34.47)%, (20.78)%, 1.96%, 66.84%, and 30.40% respectively [1] - The latest diluted EPS (Earnings Per Share) is projected as follows: - 2023A: 0.27 yuan - 2024A: 0.21 yuan - 2025E: 0.21 yuan - 2026E: 0.36 yuan - 2027E: 0.47 yuan [1] - The P/E (Price-to-Earnings) ratios at current price and latest diluted EPS are: - 2023A: 80.56 - 2024A: 101.69 - 2025E: 99.73 - 2026E: 59.78 - 2027E: 45.84 [1]

Core Viewpoint - Bank of America Securities reports that Smoore International (06969) experienced an 18% year-on-year increase in revenue for the first half of the year, while net profit after tax fell by 2.5%, which is roughly in line with expectations [1] Financial Performance - Smoore International's revenue growth for the full year is expected to improve slightly, but profit margins are anticipated to remain under pressure [1] - The bank has lowered its earnings per share estimates for the company by 5% and 10% for the current and next year, respectively [1] Target Price Adjustment - The target price for Smoore International has been reduced by 6% to HKD 8.7 [1] - The rating has been reaffirmed as "underperform" [1]