Investment Rating - The report assigns a "Buy" rating to the company with a target price of HKD 20.2, compared to the current price of HKD 16.9 as of June 18, 2024 [1]. Core Insights - The company, China Tobacco Hong Kong (6055.HK), has shown strong growth in recent years, with a record revenue of HKD 11.8 billion in 2023, representing a 42% year-on-year increase, and a net profit of HKD 690 million, up 49% year-on-year [5][14]. - The growth drivers include the recovery of cigarette export business, an increase in both volume and price in tobacco leaf imports, and growth in tobacco leaf exports [20]. - The company's unique competitive advantage lies in its exclusive operating rights for tobacco imports into China and exports to Southeast Asia and regions like Hong Kong and Macau [5][23]. Company Overview - China Tobacco Hong Kong was established in 2004 and serves as the designated overseas platform for China Tobacco International, focusing on capital market operations and international business expansion [9]. - The company is primarily engaged in the import and export of tobacco leaves, cigarette exports, and new tobacco products [9]. Financial Performance - The company reported a significant increase in revenue and net profit in 2023, with revenue contributing 68.26% from tobacco leaf imports and cigarette exports being the second-largest source of profit [14][18]. - The forecast for 2024 indicates a revenue growth of at least 10% and a net profit increase of no less than 30% in the first half of the year [20]. Market Dynamics - The global tobacco production has been declining, but prices are currently in an upward cycle, influenced by factors such as climate conditions affecting supply [44]. - The company benefits from a stable demand for high-end tobacco leaves in China, with a notable increase in imports and prices over recent years [39][48]. Business Segments - The tobacco leaf import business has shown robust growth, with revenue increasing from HKD 4.63 billion in 2019 to HKD 8.08 billion in 2023, reflecting a compound annual growth rate of 14.9% [25]. - The cigarette export business is recovering post-pandemic, with potential for further growth as international travel resumes [29]. Future Outlook - The company anticipates continued growth in its new tobacco product exports, particularly in the heated not burned (HNB) market, which reached a market size of USD 34.1 billion in 2023, growing by 11.6% [5][20]. - The expected revenue for the company is projected to reach HKD 13.1 billion in 2024, HKD 14.4 billion in 2025, and HKD 15.8 billion in 2026 [5].
中烟香港：烟草进口量价齐升，卷烟出口增长强劲