Investment Rating - The report maintains an "Outperform" rating for the light industry sector [6][10]. Core Insights - Recent financial reports from major overseas tobacco companies for H1 2025 show overall stable performance, with new tobacco products continuing to drive growth. British American Tobacco, Philip Morris International, and Japan Tobacco have all raised their annual forecasts [18]. Summary by Relevant Sections British American Tobacco (BAT) - For H1 2025, BAT reported revenues of £12.069 billion, a decrease of 2.2% year-on-year, with new tobacco products accounting for 13.7% of total revenue [2][19]. - The revenue from heated tobacco products was £440 million, showing a slight increase of 0.8%, while the revenue from new oral tobacco products surged by 38.1% to £470 million [20][21]. Philip Morris International (PMI) - PMI's Q2 2025 net revenue reached $10.14 billion, reflecting a year-on-year increase of 7.1%, with smoke-free tobacco products making up 41.6% of total revenue [3][28]. - The global shipment of heated tobacco units was 38.8 billion, up 9.2% year-on-year, with IQOS market share in Japan increasing to 31.7% [29]. Japan Tobacco - Japan Tobacco reported Q2 2025 revenues of ¥907.6 billion, a 9.4% increase year-on-year, with heated tobacco product shipments rising by 31.2% [4][38]. - The company has adjusted its annual revenue growth forecast to 8.4% and operating profit growth to 14.6% [38]. Altria - Altria's Q2 2025 revenue was $6.1 billion, down 1.7% year-on-year, with oral tobacco product revenue increasing by 5.9% [5][12]. Market Overview - The light industry sector experienced a relative return of +0.16% last week, despite a decline of 1.59% in the overall sector [6][9]. - Furniture retail sales in June increased by 28.7% year-on-year, while building materials sales saw a decline of 8.9% [6][12]. Investment Recommendations - The report recommends focusing on leading companies in the home furnishing sector, such as Oppein Home, Sophia, and Kuka Home, as well as in the paper and packaging sectors, highlighting Sun Paper and Yutong Technology as key investment opportunities [9][16].

Core Viewpoint - The current earnings season for U.S. consumer stocks has led to an unusual sell-off, despite strong earnings reports, indicating deep-seated market concerns about the sustainability of consumer strength [1][2]. Group 1: Earnings Performance - 83% of the 317 S&P 500 companies that have reported earnings exceeded expectations, yet stock prices generally fell post-announcement [1]. - Companies like Procter & Gamble (PG) and PepsiCo (PEP) experienced initial stock price increases after reporting strong earnings, but ultimately saw declines in the following days [3]. Group 2: Market Sentiment - The prevailing market environment suggests a tactical "sell-the-news" approach, with investors opting to take profits rather than establish new long positions [2]. - Negative earnings surprises have led to significant stock price drops, with companies like Philip Morris International (PM) and Chipotle Mexican Grill (CMG) facing severe sell-offs following disappointing results [4]. Group 3: Exceptions to the Trend - A few companies managed to resist the broader sell-off, including Las Vegas Sands (LVS), Wingstop (WING), and Builders FirstSource (BLDR), which showed resilience due to specific business strengths [5]. - Despite these exceptions, the overall sentiment in the consumer sector remains pessimistic, with investors wary of future economic uncertainties [5].

Investment Rating - The report maintains a "Weaker than Market" rating for the U.S. stock market [1] Core Insights - The U.S. stock market experienced a sudden pullback influenced by non-farm employment data, with the S&P 500 declining by 2.4% and the Nasdaq by 2.2% [3] - Among sectors, large-cap value stocks outperformed large-cap growth and small-cap stocks, indicating a preference for stability in turbulent market conditions [3] - The report highlights that three sectors saw gains while 21 sectors faced declines, with utilities, food and staples retailing, and media and entertainment being the only sectors to rise [3] Summary by Sections Price Trends - The S&P 500 fell by 2.4% and the Nasdaq by 2.2% this week, with large-cap value stocks declining by 1.8% compared to a 3.1% drop in large-cap growth stocks [3] - Utilities (+1.6%), food and staples retailing (+0.9%), and media and entertainment (+0.2%) were the only sectors to increase, while transportation (-5.9%), materials (-5.1%), and retail (-4.8%) faced the largest declines [3] Fund Flows - The estimated fund flow for S&P 500 constituents was -$16.95 billion this week, a significant increase from the previous week's -$2.2 billion [4] - Media and entertainment (+$1.59 billion), utilities (+$0.27 billion), and food and staples retailing (+$0.042 billion) saw inflows, while healthcare equipment and services (-$3.47 billion) and financials (-$4.15 billion) experienced the largest outflows [4] Earnings Forecast - The report indicates a 0.6% upward adjustment in the 12-month EPS forecast for S&P 500 constituents, with 18 sectors seeing an increase and 5 sectors experiencing downgrades [5] - Retail (+3.3%), media and entertainment (+2.0%), and technology hardware (+1.5%) led the upward revisions, while healthcare equipment and services faced a significant downgrade of -3.6% [5]

Core Insights - Philip Morris International's smoke-free business is expanding significantly, with IQOS and ZYN being pivotal to this growth. In Q2 2025, smoke-free business contributed 41% of total net revenues and over 42% of total gross profit, indicating a strong shift from combustible products [1][8]. Smoke-Free Business Performance - Smoke-free business net revenues increased by 15.2% year-over-year (14.5% organically), while gross profit rose by 23.3% (21.5% organically), outpacing the growth of combustible products [1]. - IQOS, the heat-not-burn device, experienced an 11.4% increase in global sales in Q2, with a market share of 31.7% in Japan and a rise of 1.2 points to 10.9% in Europe [2][8]. - ZYN, the leading nicotine pouch, saw a 36% growth in June and 26% in Q2 in the U.S., with global shipments increasing by 43% year-over-year, driven by strong U.S. demand and international expansion [3][8]. Competitive Landscape - Altria Group's on! nicotine pouch brand reported a 26.5% increase in shipments to 52.1 million cans in Q2 2025, capturing an 8.7% retail share of the U.S. oral tobacco market [5]. - Turning Point Brands' modern oral nicotine pouch sales surged nearly tenfold year-over-year, generating $22.3 million in revenues, with a revised full-year sales guidance of $80–$95 million [6]. Valuation and Earnings Estimates - Philip Morris shares have declined by 8.6% in the past month, compared to a 1.7% decline in the industry [7]. - The company trades at a forward price-to-earnings ratio of 20.26X, higher than the industry's average of 14.56X [10]. - Zacks Consensus Estimates indicate year-over-year earnings growth of 14% for 2025 and 12% for 2026 [11].

Core Insights - The tobacco sector presents two main investment options: Altria Group, Inc. and Philip Morris International Inc., each with distinct market strategies and growth trajectories towards a smoke-free future [1][2] Altria Group, Inc. - Altria focuses on the U.S. market, leveraging its Marlboro brand while expanding into alternatives like NJOY and oral nicotine pouches [2] - The company achieved a 10.8% net price realization in smokeable products in Q1 2025, contributing to a 2.7% increase in adjusted operating income [3][9] - Altria's oral nicotine pouch brand, on!, saw an 18% increase in shipments, capturing 8.8% of the oral tobacco category and 17.9% of the nicotine pouch segment [4][9] - Despite setbacks in the e-vapor category, Altria is refining its product pipeline and advocating for regulatory reforms to combat the rise of illicit disposable e-vapor products, which account for over 60% of the U.S. market [5] - The cigarette industry faces challenges, with shipment volumes declining due to macroeconomic pressures and the growth of illegal e-vapor products, impacting low-income smokers [6] Philip Morris International Inc. - Philip Morris is advancing its transformation strategy with a strong smoke-free portfolio, including IQOS, ZYN, and VEEV, and has approximately 41.5 million adult users by Q2 2025 [7][9] - IQOS is the primary driver of growth, with accelerated adoption in key markets supported by commercial initiatives and product innovations [8][10] - The company offers smoke-free products in 97 markets, with nearly half providing multiple product categories, enhancing its global reach [10] - Philip Morris faces challenges such as currency volatility and increasing regulatory risks, particularly regarding nicotine pouch marketing [11] Financial Performance and Valuation - Altria's forward P/E ratio is 10.96, appealing to income-focused investors, while Philip Morris has a higher multiple of 20.12, reflecting its global presence and momentum in smoke-free products [15] - Over the past month, Altria gained 2.1%, while Philip Morris dropped 11.6%, underperforming the S&P 500's 3.4% rise [14] Conclusion - Philip Morris is better positioned for long-term growth with its aggressive pivot towards a smoke-free future and strong global traction, while Altria's focus on domestic stability and pricing strength supports income-focused investors but faces more headwinds [16]

Investment Rating - The industry is rated as "Buy" based on the expectation of an increase exceeding 15% in the next 3-6 months [6] Core Insights - The new tobacco industry continues to show strong growth trends, with PMI reporting a revenue increase of 7.1% and adjusted operating profit growth of 16.1% in Q2 2025 [1] - The HNB (Heated Not Burned) market is expected to grow significantly, particularly in the U.S., as the FDA's approval of JUUL products indicates a clear trend towards market expansion [2][3] - The overall HNB global market is on a continuous growth trajectory, with the U.S. market poised to contribute significantly to this growth [4] Summary by Sections Financial Performance - In Q2 2025, PMI achieved revenues of $10.1 billion and adjusted operating profits of $4.3 billion, reflecting year-on-year increases of 7.1% and 16.1% respectively [1] - New tobacco revenue in Q2 2025 reached $4.2 billion, a 15.2% increase year-on-year, with HNB sales volume also increasing by 9.2% to 38.8 billion sticks [1] Regulatory Environment - The FDA has approved JUUL's products for sale in the U.S., increasing the total number of approved vaping products from 34 to 39, indicating a more favorable regulatory environment for compliant products [2] - The FDA's focus on combating illegal products while facilitating the approval of compliant products suggests a dual approach to market regulation [3] Market Outlook - The HNB market in Europe is recovering from flavor bans, with PMI reporting double-digit growth in Q2 2025, indicating resilience in consumer demand [3] - The legal market for HNB products is expected to expand significantly, driven by regulatory changes and increasing consumer acceptance [4]

Investment Rating - The report provides a positive outlook on various sectors, indicating a stable recovery in the home furnishing and paper packaging sectors, while new tobacco and packaging sectors show robust growth [3][4]. Core Insights - The home furnishing sector is expected to see marginal improvement in domestic demand due to government support for consumption upgrades, with a focus on companies with high dividend yields and growth certainty for 2025 [5][10]. - The new tobacco sector is experiencing growth, particularly in heated tobacco products (HTP), with significant sales increases reported in Europe and a growing user base for IQOS [11]. - The paper packaging sector is facing a gradual recovery in pulp prices, with a focus on companies that maintain strong market positions and high dividends [12]. - The light consumer goods and pet food sectors are under pressure, but there are opportunities in innovative product launches and channel expansion [15]. - The two-wheeler sector is poised for a rebound with government subsidies and new standards expected to drive demand [16][17]. Summary by Sections Home Furnishing - Domestic sales are expected to improve due to government initiatives, with a focus on companies with strong growth prospects and high dividends [5][10]. - Export figures show a slight increase in June, but a cumulative decline for the first half of the year [10]. New Tobacco - HNB sales increased by 10.5% year-on-year, with a growing user base for IQOS [11]. - The regulatory environment in the U.S. is tightening, which may benefit compliant market players [11]. Paper Packaging - Pulp prices have shown slight increases, but overall market conditions remain challenging [12]. - Companies with strong market positions and dividend policies are recommended for investment [12]. Light Consumer Goods & Pet Food - The sector is facing challenges, but there are opportunities in new product launches and expanding distribution channels [15]. - Online sales data indicates mixed performance across different product categories [23]. Two-Wheeler - The sector is expected to benefit from government subsidies and new regulations, with a focus on companies that can leverage these changes for growth [16][17]. - Recent data shows a significant number of electric bikes being replaced under the subsidy program [26][27].

Core Viewpoint - Traditional cigarette sales are declining, but Philip Morris International is offsetting this with strong growth in its newer nicotine products, particularly the Zyn brand and heated tobacco units [1][10]. Group 1: Sales Performance - Zyn shipments in the U.S. increased by 40% to 190 million cans in Q2, with retail sales volumes growing by 26% in the quarter and 36% in June [1]. - Outside the U.S. and Nordic countries, Zyn shipments more than doubled, now available in 44 markets, with overall oral product shipments climbing 23.8% [2]. - Sales volumes of heated tobacco units (HTUs), including the Iqos system, rose nearly 9.2% to 38.8 billion units, with in-market sales increasing by 11.4% [4]. - E-vapor product Veev saw shipment growth more than double, driven by pod growth in Europe, now in 42 markets and holding the No. 1 market share in six European markets [5]. Group 2: Financial Metrics - Organic revenue rose 6.8% year over year to $10.1 billion, with adjusted earnings per share (EPS) climbing 20% to $1.91 [6]. - Traditional cigarette volumes fell by 1.5% to 155.2 billion units, but segment organic revenue grew 2% to $6 billion, and gross profits increased by 5% to $4 billion due to price hikes [5]. - Management maintained its full-year guidance for organic revenue growth at 6% to 8% while raising adjusted EPS guidance to $7.43 to $7.56 [9]. Group 3: Market Outlook - The company expects a 3% to 4% decline in traditional cigarette volumes due to supply chain issues in Turkey and competition from illicit cigarettes in Indonesia [7][8]. - Despite the forecast for steeper declines in cigarette sales volumes, the smoke-free portfolio, particularly Zyn and Iqos, continues to show strong growth and better unit economics [10][11]. - The stock is viewed as undervalued with a forward price-to-earnings (P/E) ratio under 22 and a PEG ratio below 0.35, indicating potential for growth [12]. Group 4: Investment Considerations - The current share price offers a forward dividend yield of 3.3%, which, while lower than some competitors, positions the company as a unique growth stock in a defensive industry [13]. - The dip in stock price presents a potential buying opportunity for long-term investors [13].

Core Insights - Philip Morris International (PM) raised its 2025 earnings per share (EPS) guidance to $7.43-$7.56, reflecting strong second-quarter performance driven by smoke-free products, indicating a year-over-year growth of 13-15% [1][10] Financial Performance - In Q2 2025, smoke-free net revenues increased by 15.2% year over year, with gross profit for this segment rising over 23%, contributing 41% to total net revenues and 42% to gross profit [2][10] - Adjusted operating income grew by 16.1% in the quarter, outpacing revenue gains, attributed to strong pricing, improved scale efficiencies, and a favorable category mix towards higher-margin smoke-free products [4][10] Product Performance - The multi-category smoke-free platform showed broad-based growth, with IQOS heated tobacco units' adjusted in-market sales rising by 11.4%, supported by global expansion and recovery in European markets [3] - ZYN experienced a significant rebound, with U.S. consumer offtake increasing by 26% in the quarter and 36% in June, driven by better in-store availability and renewed commercial activity [3] Market Strategy - The raised EPS guidance indicates management's confidence in the sustainability of recent smoke-free category growth, suggesting that the multi-category strategy is gaining traction faster than anticipated [5] Competitive Landscape - Altria Group's "on!" nicotine pouch brand saw an 18% increase in shipment volume, while Turning Point Brands reported nearly tenfold growth in modern oral nicotine pouch sales, contributing $22.3 million in revenues [6][7][8] Valuation Metrics - Philip Morris shares have declined by 10.2% in the past month, compared to the industry's decline of 2.2% [9] - The company trades at a forward price-to-earnings ratio of 20.16X, higher than the industry's average of 14.67X [12] - The Zacks Consensus Estimate for PM's earnings implies year-over-year growth of 14.2% for 2025 and 11.9% for 2026 [13]

Company Overview and Strategic Direction - Philip Morris International is a leading global producer of tobacco and nicotine products, operating in approximately 170 markets with well-known brands such as Marlboro, Parliament, IQOS, ZYN, and VEEV [2] - The company is transitioning from traditional combustible cigarettes to smoke-free alternatives, including heated tobacco devices, oral nicotine pouches, and electronic vapor products [3] Quarterly Performance Highlights - In Q2 2025, adjusted earnings per share were $1.91, exceeding the estimate of $1.86 by 2.7%, while GAAP revenue was $10.1 billion, falling short by 2.1% [1] - Smoke-free products accounted for 41% of net revenue, an increase of 2.9 percentage points year-over-year, with gross profit from these products exceeding 42% of total gross profit [4] - Shipments of smoke-free products rose by 11.8%, with net revenue in this segment increasing by 15.2% and gross profit up by 23.3% [4] Product Performance - IQOS generated over $3 billion in net revenue, holding a 76% share of the global heat-not-burn category, with sales volumes in Europe growing by 9.1% and in Japan by 7.8% [5] - ZYN pouches saw a global shipment volume increase of 26.5%, with U.S. shipments rising over 40% to 190 million cans [6] - VEEV e-vapor product volumes more than doubled, achieving top market positions in six European countries [6] Traditional Cigarette Segment - Traditional cigarette volumes declined by 1.5%, but revenue for this segment grew by 2.1% due to strong pricing [7] - Marketing, Administration, and Research Costs increased by 16.0% compared to the previous year [7] Regional Performance - Europe's organic revenue rose by 7.3%, driven by smoke-free growth, while the Americas experienced a 17% increase in organic net revenues, primarily from oral nicotine [8] - The European market faced a 1.7% decline in shipment volume, mainly due to cigarette declines in specific countries [8] Future Outlook - The company raised its full-year adjusted diluted EPS guidance to $7.43, reflecting an 11.5% to 13.5% growth from last year's adjusted EPS of $6.57 [10] - Organic net revenue growth is forecasted at 6-8%, with smoke-free product volumes expected to grow by 12-14% and cigarette volumes projected to decline by about 2% [10] - Capital expenditure guidance is set at $1.6 billion, primarily for smoke-free product scale-up, with operating cash flow expected around $11.5 billion [10]