Core Viewpoint - UBS has raised the target price for Smoore International (06969.HK) to HKD 14 while maintaining a "Sell" rating, citing a significant increase in revenue from ODM and HNB businesses, despite rising competition and associated costs [1] Financial Performance - The company reported a year-on-year revenue growth of 18% in the first half of the year, attributed to a recovery in the vape business and preemptive increases in shipment volumes ahead of U.S. tariffs [1] - UBS has updated its earnings forecasts for Smoore International for 2025 to 2027, with adjustments of -21%, +1%, and +21% respectively [1] Profit Outlook - The company is expected to see a year-on-year decline in net profit of 21% to 35% in the second half of the year, primarily due to high expenses related to stock options granted in the fourth quarter and S&D costs [1] Valuation - UBS maintains that Smoore International's valuation is rich and already reflects the growth potential from Vapes and HNB [1] - The target price has been increased from HKD 10.7 to HKD 14 [1]

Group 1 - The company forecasts a revenue of 6.013 billion yuan for H1 2025, representing an 18% year-on-year increase, while net profit is expected to be between 443 million and 541 million yuan, reflecting a decline of 21% to 35% year-on-year [1] - The decline in profit is attributed to increased non-cash expenses related to stock options and awards, higher distribution and sales expenses due to market expansion, and a significant rise in legal service costs [1] - Adjusted net profit, excluding non-cash stock-based payment expenses, is projected to be between 688 million and 787 million yuan, indicating a year-on-year change of -9% to +4% [1] Group 2 - The company's vaping business benefits from the global market's compliance development, with revenue growth driven by proprietary brand and enterprise customer business [1] - In the UK, a ban on disposable e-cigarettes has caused significant market disruption, leading to a shift in demand towards reusable e-cigarette products [1] - In the US, the FDA and CBP have intensified actions against illegal e-cigarettes, seizing over 135 million USD worth of products since 2023, which is expected to support the growth of the company's proprietary brand and enterprise customer business [1] Group 3 - British American Tobacco's Glo Hilo product, utilizing infrared quartz heating technology, is set for nationwide launch in Japan after successful trials, with a retail price of approximately 25 USD [2] - The company aims to revitalize market growth in Japan, which is a key strategic market for smoke-free products, as sales of smoke-free products have surpassed traditional cigarettes [2] - The HNB business is expected to contribute significantly to revenue growth starting in 2025, with projected net profits for 2025-2027 being 1.337 billion, 1.912 billion, and 2.760 billion yuan respectively, reflecting year-on-year growth rates of +2.57%, +43.01%, and +44.35% [2]

Investment Rating - The report maintains a "Buy" rating for the company, expecting a relative return of over 20% within the next six months [5][14]. Core Viewpoints - The company is expected to benefit from the tightening global regulations on vaping products, particularly in the e-cigarette sector, and anticipates significant growth in its Heat-Not-Burn (HNB) business [2][4]. - The company reported a revenue of 6.013 billion yuan for the first half of 2025, representing an 18% year-on-year increase, driven by growth in its proprietary brand and enterprise client businesses [2][4]. - The decline in net profit, projected between 443 million to 541 million yuan, is attributed to increased non-cash expenses related to stock options and a rise in marketing and legal costs [1][4]. Summary by Sections Financial Performance - For the first half of 2025, the company expects revenue of 60.13 billion yuan, up 18% year-on-year, while net profit is projected to decline by 21% to 35% [1][2]. - Adjusted net profit, excluding non-cash stock-based payments, is estimated to be between 688 million to 787 million yuan, reflecting a year-on-year change of -9% to +4% [1]. Market Dynamics - The UK market is undergoing significant changes due to a ban on disposable e-cigarettes, which is expected to shift consumer demand towards reusable products [2]. - In the US, regulatory actions against illegal e-cigarettes have intensified, with over 135 million USD worth of illegal products seized since 2023, indicating a tightening market environment [2]. Growth Opportunities - The HNB business is anticipated to become a significant growth driver starting in 2026, contributing notably to revenue and profit [4]. - The company is enhancing its market presence, particularly in overseas markets, which is expected to sustain growth in its proprietary brand and enterprise client segments [2][4].

Core Viewpoint - The company forecasts a revenue of 6.013 billion yuan for H1 2025, representing an 18% year-over-year increase, while net profit is expected to decline by 21% to 35% year-over-year, primarily due to increased non-cash share payments and rising operational costs associated with brand expansion and legal services [1] Group 1: Business Performance - The company’s revenue growth in H1 2025 is attributed to strengthened enforcement and regulatory policies in the U.S. and parts of Europe, leading to good growth in both its proprietary brand and ToB businesses [1] - The adjusted net profit for H1 2025 is projected to be between 688 million and 787 million yuan, reflecting a year-over-year change of -9% to +4% [1] Group 2: Regulatory Environment - The U.S. FDA and state governments have intensified enforcement against non-compliant electronic vapor products, which has positively impacted the sales of compliant products [2] - In Europe, regulations on disposable e-cigarettes have tightened, with bans in the UK and New Zealand taking effect, which is expected to shift consumer demand towards compliant products [2] Group 3: New Business Development - The Glo Hilo product, launched in Japan, has shown improved performance compared to its Serbian counterpart, with enhanced heating efficiency and a wider variety of flavor options [3] - The product is set to be rolled out nationwide in Japan, which is anticipated to benefit the company as a product innovator and supply chain partner [3] Group 4: Financial Forecast and Valuation - The company maintains its profit forecast, expecting net profits of 1.323 billion, 2.140 billion, and 2.762 billion yuan for 2025-2027, with corresponding EPS of 0.21, 0.35, and 0.45 yuan [3] - A target price of 25.00 HKD is set, reflecting a valuation premium due to high competitive barriers in the HNB new business and the steady recovery of the vapor main business [3]

Core Viewpoint - The company is expected to see a significant improvement in its performance due to the favorable regulatory environment for vaping products and the growth of its heated non-combustible tobacco (HNB) business [1][2]. Financial Performance - For the first half of 2025, the company anticipates revenue of 6.013 billion yuan, representing an 18% year-on-year increase [1]. - The projected net profit for 2025H1 is between 443 million and 541 million yuan, indicating a year-on-year decline of 21% to 35%, with a midpoint decrease of 28% [1]. - Adjusted net profit, excluding stock incentive expenses, is expected to be between 688 million and 787 million yuan, reflecting a year-on-year change of -9% to +4%, with a midpoint of -2.5% [1][2]. Business Analysis - The company’s vaping business is benefiting from increased enforcement against illegal products in the U.S., with the FDA and customs seizing nearly 34 million USD worth of illegal e-cigarettes [1]. - The U.S. Senate has approved a 200 million USD budget for the FDA to combat illegal vaping products, indicating a positive regulatory trend for the compliant market [1]. - In Europe, the UK has banned disposable e-cigarettes, leading to a potential increase in sales of refillable products, which the company is well-positioned to capitalize on [1]. - The HNB product Glo hilo is currently in pilot sales in Serbia and Sendai, Japan, and is expected to contribute positively in the future [1]. Profitability Outlook - The company’s profitability is expected to improve due to a higher proportion of high-margin vaping products and the ongoing development of the HNB business [2]. - The adjusted profit margin is anticipated to show improvement, driven by the enhanced product mix in the vaping segment [2]. - The company is positioned uniquely in the market as the only listed entity deeply integrated into the supply chain of major overseas tobacco groups, which provides a competitive edge [2]. Earnings Forecast - The company projects earnings per share (EPS) of 0.21, 0.42, and 0.58 yuan for the years 2025 to 2027, with corresponding price-to-earnings (PE) ratios of 94, 48, and 34 times [2].

Investment Rating - The report does not provide a specific investment rating for the company [1] Core Views - The company is expected to achieve a revenue of 60.13 billion yuan in the first half of 2025, representing an 18.3% year-on-year increase. However, the total comprehensive income is projected to be between 4.51 billion and 5.51 billion yuan, indicating a decline of 23.9% to 37.8% year-on-year, with a median estimate of 5.01 billion yuan, which is a 30.8% decrease [1] - The company anticipates maintaining double-digit revenue growth in Q2 2025, although profits are under pressure due to increased share-based payment expenses of 176 million yuan and a rise in sales and management expense ratios [1] - The company is actively responding to market changes, with expectations for stable growth despite regulatory pressures on traditional disposable products. The company is focusing on expanding its compliance product offerings and enhancing its self-owned brand overseas [2] - The HILO product is performing well, with an accelerated expansion in the Japanese market, which is expected to contribute positively to the company's HNB growth [2] - Profit forecasts for the company indicate net profits of 12.1 billion, 20.3 billion, and 30.0 billion yuan for 2025, 2026, and 2027 respectively, with corresponding P/E ratios of 99.4X, 59.3X, and 40.3X [2] Financial Summary - The total revenue for 2024 is projected at 11.799 billion yuan, with a growth rate of 6%. For 2025, the revenue is expected to be 12.011 billion yuan, reflecting a 2% growth. The net profit attributable to the parent company is forecasted to be 1.303 billion yuan in 2024, decreasing to 1.213 billion yuan in 2025, before rising to 2.034 billion yuan in 2026 and 2.995 billion yuan in 2027 [4][6] - The company's operating income is expected to grow from 11.799 billion yuan in 2024 to 17.063 billion yuan in 2027, with a compound annual growth rate of approximately 22.57% [4][6] - The company's cash flow from operating activities is projected to be 1.753 billion yuan in 2024, decreasing to 942 million yuan in 2025, and then increasing to 3.084 billion yuan by 2027 [7]

Summary of Smoore International and the E-Cigarette Industry Update Company and Industry Overview - **Company**: Smoore International - **Industry**: E-Cigarette and Vapor Products Key Points and Arguments 1. **Revenue Performance**: Smoore International reported an 18% year-on-year increase in revenue for the first half of 2025, with both ODM business and free brand business showing strong growth, particularly among small clients [2][5] 2. **U.S. Market Recovery**: The enforcement of regulations against non-compliant disposable e-cigarettes in the U.S. is expected to clear the market of non-compliant products, creating a better environment for compliant products and aiding Smoore's business recovery [3][7] 3. **European Market Changes**: The implementation of a ban on disposable e-cigarettes in Europe starting June 1, 2025, is anticipated to increase the market share of compliant products, which is favorable for Smoore in the long term [4][7] 4. **Profit Decline Factors**: Smoore's profit decreased by 21% to 35% in the first half of 2025, primarily due to increased equity incentive costs and legal-related expenses, with equity incentive costs expected to rise by over 300 million yuan for the year [5][12] 5. **New Product Trials in Japan**: The new product Hilo, developed in collaboration with British American Tobacco, has shown optimistic trial results in Sendai, Japan, with a high user satisfaction rate and a significant conversion rate from traditional smokers [6][7] 6. **Future Growth Trends**: The HNB (Heat-Not-Burn) market is expected to grow, with favorable conditions in the U.S. and Europe, and successful product trials in Japan indicating a positive outlook for Smoore's future [7][10] 7. **Impact of Tariffs on Indonesian Factory**: The tariff issues related to the Indonesian factory are expected to have a limited impact on overall performance due to high product markup and low unit prices, as the products are considered addictive consumer goods [8][12] 8. **Sales Performance in Japan**: The overall sales situation in Japan is optimistic, with expectations of meeting annual performance guidance despite 2025 not being a high-profit year [9][10] 9. **Traditional E-Cigarette Market Trends**: The traditional e-cigarette market in the U.S. and Europe is showing marginal improvement, indicating a positive trend in both policy and operational aspects [10][12] 10. **THC and Medical Aesthetics Growth**: The THC vaporization products are stabilizing, and related fields such as medical aesthetics are showing promising growth prospects, potentially providing new growth opportunities for Smoore [11][12] Additional Important Insights - **Stock Volatility and Investment Value**: Despite lower profits in 2025, Smoore's long-term investment value remains significant, warranting close attention from investors [12]

Investment Rating - The report maintains a "Buy" rating for the company [5] Core Views - The company is expected to achieve strong revenue growth in 25H1, with a forecasted revenue of 60.13 billion, representing an 18% year-on-year increase, outperforming market expectations [1] - Profit is projected to decline to between 4.43 billion and 5.41 billion, a decrease of 21% to 35% year-on-year, with an average estimate of 4.92 billion, indicating a significant narrowing of the profit decline in Q2 [1][2] - The decline in profit is attributed to increased incentive costs, marketing investments, and legal service fees, with adjusted net profit expected to be between 6.88 billion and 7.87 billion, reflecting a year-on-year change of -9% to +4% [2] Revenue Insights - The company's revenue from vaping products has shown resilience due to regulatory improvements, with all products being compliant [3] - The implementation of bans on disposable e-cigarettes in various regions, including the UK and New Zealand, has led to a shift towards open and refillable e-cigarettes, benefiting the company's sales [3] Future Outlook - The recent trial sales of HNB products in Japan have received positive feedback, with expectations for significant market share growth as the product is set for nationwide launch on September 1 [4] - The pricing strategy for Glo Hilo in Japan has been adjusted to enhance supply chain value distribution, indicating a strong competitive position [4] Financial Forecast and Valuation - The company is projected to achieve revenues of 131.61 billion, 155.90 billion, and 186.33 billion from 2025 to 2027, with year-on-year growth rates of 11.55%, 18.45%, and 19.52% respectively [5] - Net profit is expected to reach 13.11 billion, 20.40 billion, and 27.63 billion during the same period, with growth rates of 0.57%, 55.68%, and 35.40% respectively [5] - The current market capitalization corresponds to a PE ratio of 90.72X, 58.28X, and 43.04X for the years 2025 to 2027 [5]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 25.00, up from the previous target of HKD 16.25 [6][4]. Core Insights - The company is expected to see a revenue increase of 18% year-on-year for the first half of 2025, with projected revenue of HKD 60.13 billion. However, net profit is forecasted to decline by 21% to 35% year-on-year, primarily due to increased non-cash share payments and rising operational costs associated with expanding its proprietary brand business [1][4]. - The regulatory environment in the US and Europe is tightening, which is anticipated to drive demand for compliant products, positively impacting the company's core vaporization business [2][4]. - The new HNB product, Glo Hilo, has shown promising performance in the Japanese market, indicating significant growth potential for the company as it expands its product offerings [3][4]. Summary by Sections Revenue and Profit Forecast - The company forecasts a net profit of HKD 13.23 billion, HKD 21.40 billion, and HKD 27.62 billion for the years 2025 to 2027, respectively, with corresponding EPS of HKD 0.21, HKD 0.35, and HKD 0.45 [4][10]. Market and Regulatory Environment - The report highlights that the enforcement of regulations by the FDA in the US and similar measures in Europe are expected to restore sales of compliant vapor products, benefiting the company's market position [2][4]. Product Development and Innovation - The Glo Hilo product, launched in Japan, features enhanced heating efficiency and a variety of flavor options, which are expected to validate the product's market potential and drive future growth [3][4]. Valuation Metrics - The report assigns a PE ratio of 65 for 2026, reflecting the company's strong growth prospects and competitive advantages in the HNB market, leading to a target price increase [4][10].

Investment Rating - The report maintains a "Buy" rating for the company, expecting a price increase of over 15% in the next 6-12 months [5]. Core Views - The company is expected to benefit significantly from the ongoing crackdown on illegal vaping products in overseas markets, particularly in the U.S. and Europe, leading to an expansion of the compliant market [3][4]. - The company's adjusted net profit for the first half of 2025 is projected to be between 688-787 million yuan, reflecting a year-on-year change of -9% to +4% [2]. - The report highlights the improvement in the company's profitability due to a higher proportion of high-margin products in the vaping segment and the ongoing development of the HNB (Heat-not-Burn) business [4]. Financial Performance Summary - For the first half of 2025, the company is expected to achieve revenue of 6.013 billion yuan, representing an 18% year-on-year increase [2]. - The projected net profit for the first half of 2025 is estimated to be between 443-541 million yuan, indicating a year-on-year decline of 21% to 35% [2]. - The company's revenue is forecasted to grow from 11.168 billion yuan in 2023 to 19.693 billion yuan by 2027, with a compound annual growth rate (CAGR) of approximately 21.09% [10]. - The diluted earnings per share (EPS) are expected to be 0.21 yuan in 2025, increasing to 0.58 yuan by 2027 [5]. Business Segment Analysis - The vaping business is showing signs of recovery due to stricter regulations against illegal products, particularly in the U.S. where the FDA has intensified enforcement [3]. - The company is positioned uniquely as the only listed entity deeply integrated into the supply chain of both vaping and HNB products for major tobacco groups in overseas markets [4]. - The report anticipates that the company's product structure will continue to improve, leading to enhanced profitability in the vaping segment [4].