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Investment Rating - The industry rating is "Outperform the Market" (first time) [7] Core Insights - British American Tobacco and Japan Tobacco International are actively capturing the heated tobacco market in Japan and South Korea, with British American Tobacco's new product Glo Hilo set for nationwide launch in Japan on September 1, 2025 [1] - Japan's market for smoke-free products has surpassed traditional cigarettes, with forecasts indicating that Philip Morris International will hold a 69.8% market share in heated tobacco by 2024, while British American Tobacco is expected to maintain a 16.3% share [1] - Japan Tobacco International plans to invest approximately 650 billion yen (about 4.4 billion USD) from 2025 to 2027, aiming for a 10% global market share in heated not burned (HNB) products by 2028 [2] - The market share of heated not burned products in South Korea has increased ninefold over seven years, from 2.2% in 2017 to 18.4% in 2024, indicating significant growth potential [3] - In the first five months of 2025, China's e-cigarette exports amounted to 4.054 billion USD, with May exports reaching 812 million USD, reflecting a year-on-year decline of 19.52% [4] Summary by Sections British American Tobacco - The Glo Hilo product utilizes infrared quartz heating technology, reaching 370 degrees Celsius in five seconds, and is priced at 3,980 yen (approximately 25 USD) [1] - The product's trial in Miyagi Prefecture was successful, leading to a nationwide rollout [1] Japan Tobacco International - The company is focusing on product innovation and channel expansion in South Korea, including the re-launch of Ploom X Advanced and the introduction of limited edition devices [2][3] - The strategy includes enhancing online and offline sales channels and responding to local consumer demands [3] E-Cigarette Market - The e-cigarette export value from China has been affected by US-China trade tensions, with a notable decline in exports to the US [4] - The Middle East market is experiencing rapid growth, with the UAE becoming a significant destination for e-cigarette exports [4] Investment Opportunities - Suggested companies to watch in the vaping supply chain include Smoore International, Jincheng Pharmaceutical, and others [5]

Core Insights - The article discusses the investment positions held by analysts in BTI and MO, indicating a positive outlook on these stocks [1] Group 1 - Analysts have a beneficial long position in the shares of BTI and MO, suggesting confidence in their future performance [1] - The article expresses personal opinions of the author, emphasizing that it is not influenced by external compensation [1]

Investment Strategy - The company adopts a global approach to investment opportunities, focusing on undervalued companies that provide a significant margin of safety, leading to attractive dividend yields and returns [1] - The investment strategy is not limited to specific sectors or countries, but emphasizes companies that are well understood and assessed for future growth potential [1] Valuation Metrics - The company shows particular enthusiasm for companies with a solid earnings track record that are trading at less than 8 times free cash flow, which is a key metric for identifying potential investments [1]

Investment Rating - The report maintains an "Overweight" rating for the retail industry [1] Core Insights - The introduction of the new heated non-combustible (HNB) products, Glo Hilo and Glo Hilo Plus, by British American Tobacco (BAT) in Japan is expected to drive growth in the HNB market, which is projected to reach a retail value of $389 billion by 2024 [4][11] - The Hilo product has received positive feedback during its trial phase, indicating a potential for rapid sales growth as it enters the broader Japanese market [10] - The global tobacco industry is nearing a trillion-dollar valuation, with new tobacco products expected to capture a larger market share as companies pivot towards harm reduction strategies [11] Industry Trends - The HNB market is anticipated to grow significantly, with BAT and other major tobacco companies increasing their focus on HNB products to facilitate a transition to smoke-free alternatives [11] - The market share for HNB products is currently dominated by Philip Morris International (71%), followed by British American Tobacco (16%) and Japan Tobacco (6%) [11] - The report suggests monitoring companies linked to BAT's HNB products, such as Smoore International, and other key players in the new tobacco product space [11] Market Performance - The report notes that the retail index increased by 4.56% during the week of June 23 to June 27, 2025, while the overall market indices also showed positive performance [12][14] - Year-to-date performance for the retail index stands at a 9.49% increase, indicating a favorable market environment for the retail sector [12][16] Company Valuation - The report includes a valuation table for various companies within the industry, highlighting their market capitalization, earnings projections, and investment ratings [18] - Notable companies such as Proya (P/E of 21), Betaini (P/E of 37), and Marubi (P/E of 48) are recommended for investment, indicating strong growth potential [18]

Core Insights - British American Tobacco (NYSE: BTI) is the second-largest tobacco company by market capitalization, valued at $105 billion [1] Company Overview - The company is undergoing a transformation towards "reduced risk" products, which is a significant aspect of its business strategy [1] Investment Perspective - The article reflects a positive outlook on the company's potential, indicating a long-term beneficial position in BTI shares [2]

Company Overview - British American Tobacco (NYSE: BTI) is one of the largest tobacco companies globally, operating in over 180 countries [1] Business Diversification - The company is transitioning from a traditional combustible cigarette business to diversifying its revenue streams into next-generation products [1]

Core Insights - The investment strategy focuses on acquiring strong businesses when they are undervalued, emphasizing a concentrated portfolio approach in various industries including telecom, banking, and technology [1] - The current emphasis is on high-quality businesses, particularly in the technology sector, which have large user bases and content libraries, highlighting the potential for cross-selling opportunities [1] - The valuation method prioritizes EBIT plus R&D investments, reflecting a belief in the long-term potential of certain R&D initiatives [1] Performance Metrics - The annual return from February 2019 to October 2024 is reported at 11.4% CAGR, which is below the market's 15.18% CAGR during the same period [1] - The investment philosophy aims to minimize portfolio turnover, suggesting that most profits will come from holding existing investments rather than frequent trading [1] Investment Philosophy - The approach does not endorse traditional "Buy" and "Sell" recommendations, instead categorizing stocks into "Strong Buy" and "Strong Sell" based on their valuation relative to exceptional business quality [1] - A "Hold" position may be initiated for high-quality businesses if their pricing is deemed unfavorable, indicating a flexible approach to investment decisions [1]

Investment Rating - Industry rating is maintained at "Outperform" [6] Core Insights - British American Tobacco focuses on expanding the Glo product line in the second half of the year, with expectations for revenue growth driven by innovative products [1] - For the fiscal year 2025, British American Tobacco anticipates revenue growth of 1-2% and adjusted operating profit growth of 1.5%-2.5%, indicating strong resilience [1] - The U.S. market is expected to recover revenue and profit growth due to enhanced delivery capabilities of combustible tobacco products and the Velo Plus brand [1] - Despite a 9% year-on-year decline in industry sales, British American Tobacco has solidified its market share in the U.S. [1] - The electronic cigarette export value from China remained stable in April 2025, with a total export value of $8.77 billion, showing a year-on-year decline of 1.84% [4] Summary by Sections Emerging Tobacco Products - Velo is the fastest-growing product in the oral tobacco category, with a market share increase of 270 basis points to 14.3% and a modern oral tobacco share increase of 350 basis points to 29.7% [2] - The U.S. market saw a total volume share increase of 550 basis points to 11.9%, driven by high trial and retention rates [2] - Glo's market share decreased by 90 basis points due to intense competition in Japan, but the launch of Glo Hilo in Serbia showed promising results [2] E-Cigarettes - Vuse maintains its global value share leadership, but the U.S. and Canadian markets are affected by illegal products [3] - The company expects a double-digit revenue decline in the first half of the year, with improvements anticipated in the second half due to the phased launch of the Vuse Ultra product [3] - Long-term goals include revenue growth of 3-5% and adjusted operating profit growth of 4-6% by 2026 [3] Market Performance - The top five export destinations for Chinese e-cigarettes accounted for 65.96% of total exports, with the U.S. being the largest market at $3.34 billion [4] - The UAE market has shown significant growth, surpassing Malaysia to become the fifth-largest destination for Chinese e-cigarette exports [4] Investment Opportunities - Suggested companies to focus on include Smoore International, Yinghe Technology, and others in the vaping supply chain [5]

Investment Rating - Industry rating is maintained at "Outperform the Market" [6] Core Insights - British American Tobacco focuses on expanding the Glo product line in the second half of the year, with expectations for revenue growth driven by innovative products [1] - The company anticipates a revenue increase of 1-2% for the fiscal year 2025, with adjusted operating profit expected to rise by 1.5%-2.5% [1] - Despite a 9% year-on-year decline in industry sales, British American Tobacco has solidified its market share in the U.S. [1] - The electronic cigarette export value from China remained stable in April 2025, with a total export amount of $8.77 billion, showing a year-on-year decline of 1.84% [4] Summary by Sections Emerging Industry - British American Tobacco's revenue for the first half of 2025 is better than expected, with strong performance in the Americas, Middle East, and Europe regions [1] - The modern oral tobacco product Velo is experiencing rapid growth, increasing its market share by 270 basis points to 14.3% [2] - Glo's market share has decreased by 90 basis points, primarily due to competition in Japan, but Glo Hilo's launch in Serbia shows promising results [2] Electronic Cigarettes - Vuse maintains its global value share leadership, but faces challenges from illegal products in the U.S. and Canada [3] - The company expects a double-digit revenue decline in the first half of the year, with improvements anticipated in the second half due to the launch of Vuse Ultra [3] - Long-term goals include a revenue growth target of 3-5% and adjusted operating profit growth of 4-6% by 2026 [3] Export Data - In the first four months of 2025, China's electronic cigarette exports totaled $3.242 billion, with the U.S. being the largest market, accounting for $334 million [4] - The UAE market has shown significant growth, surpassing Malaysia to become the fifth-largest destination for Chinese electronic cigarette exports [4] Investment Opportunities - Suggested companies to focus on include Smoore International, Yinghe Technology, and others in the vaping supply chain [5]