Investment Rating - The report maintains a "Buy" rating for Smoore International Holdings (6969.HK) with a target price of HKD 10.7, indicating a potential upside of 17% from the current price of HKD 9.12 [3][4]. Core Insights - Smoore's revenue for the first half of 2024 was HKD 50.3 billion, a year-on-year decrease of 1.7%, while net profit was HKD 6.8 billion, down 4.8% year-on-year. The gross margin improved to 38%, up 1.8 percentage points, while the net margin slightly decreased to 13.6%, down 0.4 percentage points [1]. - The company's proprietary brand products saw significant growth, with APV product revenue reaching HKD 11.1 billion, a 72% increase year-on-year. The European market experienced an 88% revenue growth, while the U.S. market grew by 20% [1]. - The report anticipates a recovery in the domestic market, with a 41% year-on-year increase in revenue from 2B products in China, suggesting that the compliant market has likely bottomed out [1]. Financial Performance Summary - Revenue and Profit Forecasts: The expected net profits for 2024, 2025, and 2026 are HKD 16.5 billion, HKD 19.0 billion, and HKD 21.0 billion, respectively, with corresponding EPS of HKD 0.29, HKD 0.34, and HKD 0.38 [1][7]. - Sales and Cost Structure: The sales expenses increased significantly by 70% to HKD 7.6 billion, primarily due to increased marketing investments in proprietary brands and beauty products. Management expenses decreased by 27% to HKD 3.4 billion [1][15]. - R&D Investment: R&D expenses for the first half of 2024 were HKD 7.6 billion, accounting for 15.1% of revenue, reflecting a year-on-year increase of 3.1 percentage points. The company is focusing on medical and beauty product development, with a 63% increase in related R&D spending [1][15]. Market Dynamics - The report highlights a shift in European regulations favoring refillable products, which is expected to boost demand for Smoore's products in the region. The company's 2B business in Europe and other markets saw a revenue decline of 16% due to stricter regulations on disposable products, but the demand for refillable products is anticipated to recover [1]. - In the U.S. market, Smoore has the highest number of PMTA certifications among its clients, which is expected to enhance its market position as regulatory enforcement strengthens [1]. Valuation Analysis - The report employs DCF and PE valuation models, estimating a fair valuation of HKD 66.1 billion, corresponding to a target price of HKD 11.1. The average PE for the electronic cigarette industry is projected at 11.3x for 2025, and considering Smoore's market leadership, a PE of 30x is applied for 2025, leading to a target price of HKD 10.2. The final target price of HKD 10.7 reflects a blend of these valuation methods [7][10].
思摩尔国际：业绩企稳，自有品牌爆发