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].

Investment Rating - The investment rating for the company is "Buy" (maintained) [5] Core Viewpoints - Recent trial feedback for Glo Hilo in Sendai, Japan has been positive, indicating that improvements in HNB product experience and faster conversion of smokers will drive industry growth, benefiting the company through its partnership with British American Tobacco [2] - The price increase of Glo Hilo's cartridges reflects confidence in product strength, with the new cartridge priced at 580 JPY (approximately 4 USD), a more than 30% increase from the previous model [3] - British American Tobacco is expected to invest significantly in Hilo, aiming for new tobacco revenue to reach 50% by 2035, up from the current 13%, highlighting the importance of HNB products for the company's future [4] Summary by Sections Recent Catalysts and Core Viewpoints - Glo Hilo's trial in Japan has shown promising results, suggesting a potential acceleration in industry growth due to enhanced product experiences [2] - The price increase of Hilo cartridges indicates strong product confidence and potential for higher returns for the company [3] - British American Tobacco's commitment to HNB products is expected to increase, with significant resources allocated to Hilo [4] Market Dynamics - The HNB market is evolving, with improved product experiences leading to higher conversion rates among traditional smokers [8] - The competitive landscape is shifting, with major players like Philip Morris, Japan Tobacco, and British American Tobacco sharing market shares more evenly [9] Regulatory Environment and Business Potential - The company is poised to benefit from stricter regulations on vaping products in Europe and North America, which may lead to increased demand for compliant products [10] - The medical business segment is expected to gain importance, with significant investments in research and development for HNB and medical aerosol products [11] Financial Projections and Valuation - Revenue projections for 2025-2027 are estimated at 128.9 billion, 153.1 billion, and 183.5 billion, with year-on-year growth rates of 9%, 19%, and 20% respectively [12] - The company is expected to achieve net profits of 13.2 billion, 20.0 billion, and 27.3 billion for the same period, with corresponding growth rates of 2%, 51%, and 36% [12]

Core Viewpoint - Smoore International (06969.HK) experienced a significant stock price drop of 9.95%, closing at HKD 17.92 per share, with a market capitalization of HKD 110.9 billion and a trading volume of HKD 1.28 billion on the same day [2] Group 1: Shareholder Actions - EVE Lithium Energy (300014) plans to reduce its stake in Smoore International by up to 3.5% within a year through block trades and centralized bidding, involving approximately 216 million shares [4] - EVE Lithium currently holds 30.73% of Smoore's total share capital, and after the reduction, it will no longer be the controlling shareholder [4] - The market value of EVE Lithium's stake in Smoore International is approximately HKD 34.08 billion, with the planned reduction valued at HKD 3.882 billion [4] Group 2: Historical Performance and Financials - EVE Lithium has invested in Smoore International for over ten years, acquiring 50.1% of its predecessor in 2014 for HKD 439 million [5] - Smoore International went public in July 2020 at an issue price of HKD 12.4 per share and has since distributed nine cash dividends, yielding EVE Lithium nearly HKD 2 billion [5] - Smoore's revenue has declined from HKD 137.55 billion in 2021 to an estimated HKD 117.99 billion in 2024, with net profits dropping from HKD 52.87 billion to HKD 13.03 billion over the same period [5] Group 3: Market Opportunities and Challenges - Smoore International has struggled to capitalize on the disposable e-cigarette market but may benefit from recent bans on disposable e-cigarettes in major sales countries [5] - The company has seen improvements in its ODM business for vaping products, with its own brand revenue increasing to 21% [6] - Smoore is collaborating with British American Tobacco on HNB products, with plans for a new product launch in mid-2025 [6] - The company is investing in the medical nebulization sector, with a 41.3% increase in R&D spending in this area, although current revenue from medical nebulization remains low at HKD 27 million [6]

Core Viewpoint - The electronic cigarette sector has regained market attention, with stocks like Smoore International experiencing significant price increases, indicating a potential recovery in the industry [1][9]. Industry Overview - The global tobacco market remains dominated by traditional cigarettes, which account for over 80% of the market, while new tobacco products, including heated not burned (HNB) and electronic cigarettes, represent a growing segment valued at $76.9 billion, approximately 8% of the market [1]. - The number of smokers aged 15 and above globally is around 1.25 billion, with a penetration rate of about 15.6%, indicating substantial room for growth in new tobacco product adoption [1]. Market Segmentation - Electronic cigarettes and HNB products are the two main categories of new tobacco, with global market shares of 28% and 45%, respectively [2]. - The global market for e-vapour products is valued at $21.2 billion, with a compound annual growth rate (CAGR) of 6.6% from 2018 to 2023, while HNB products have a market size of $34.5 billion and a CAGR of 23.3% during the same period [2][3]. Company Performance - Smoore International has shown rapid revenue growth from 2016 to 2021, increasing from 710 million to 13.76 billion yuan, with a CAGR of 81%. However, the company faced challenges in 2022 due to regulatory pressures in China and the U.S. [5]. - The company is expected to achieve a revenue of 11.799 billion yuan in 2024, reflecting a year-on-year growth of 5.56% [5]. Strategic Initiatives - Smoore has been proactive in developing HNB products since 2010 and has established a dedicated division for HNB, acquiring multiple patents and technological capabilities [6]. - The collaboration with British American Tobacco to launch the Glo Hilo series is anticipated to enhance Smoore's HNB business and overall market position [7]. Future Outlook - The Glo Hilo product is set to launch in Japan and expand into European markets, with expectations of significant profit growth starting in 2025 [8]. - The regulatory environment for electronic cigarettes is stabilizing, which may benefit compliant companies like Smoore, enhancing their market share [8][9].

Group 1 - Glo Hilo series will launch in Japan on June 9, 2025, starting with a pilot in Sendai before nationwide rollout [1] - The Glo Hilo electronic cigarette features two models: a basic version with a 76g weight and a Plus version with a modular design weighing 107g, both offering different battery life and charging capabilities [1] - The phased rollout strategy aims to optimize product strategy through small-scale testing [1] Group 2 - Innovative electronic cigarette solutions include STAR RING, the world's first fingertip gyroscope e-cigarette, and SQUEEZY POD, the world's first tactile cartridge e-cigarette, both designed for enhanced user experience [2] - The company is entering a new product capacity release cycle, with positive feedback expected from the Japanese market launch in June, potentially expanding into the European and American markets [2] - Long-term projections indicate significant market share growth for the Glo series compared to IQOS, with expected revenue growth rates of 10.9%, 19.08%, and 16.63% for 2025-2027 [2]