Investment Rating - The investment rating for Smoore International (06969) is maintained as "Buy" [7] Core Views - The report highlights the gradual improvement in electronic cigarette regulations, emphasizing the bottom value of Smoore International as a compliant market leader poised to benefit from the changing supply landscape [2][3] - The report anticipates significant revenue growth for Smoore International, projecting revenues of HK$141.32 billion, HK$163.76 billion, and HK$195.88 billion for 2025, 2026, and 2027 respectively, with year-on-year growth rates of +19.78%, +15.88%, and +19.62% [11] Summary by Sections Regulatory Environment - Recent regulatory developments include a comprehensive crackdown on illegal electronic cigarette activities, with the government emphasizing the need for stricter oversight and compliance in production and sales [2] - The National Tobacco Monopoly Administration has initiated measures to curb excessive competition and prevent overcapacity in the electronic cigarette industry [2] Market Performance - British American Tobacco's Hilo brand is expected to see positive growth, with new product launches in various countries contributing to revenue increases [3] - The report notes a recovery in the vaping segment, with improved sales for the Vuse brand in the U.S. due to enforcement actions against illegal products [4] Financial Highlights - Smoore International executed significant share buybacks totaling approximately HK$1.99 billion, reflecting confidence in its long-term growth prospects [5] - The forecasted net profit for Smoore International is projected to be HK$9.13 billion, HK$18.46 billion, and HK$26.75 billion for 2025, 2026, and 2027, with respective growth rates of -29.94%, +102.23%, and +44.87% [11]

Core Viewpoint - The report from the National Tobacco Monopoly Administration highlights the regulatory status of e-cigarettes in China, indicating significant enforcement actions and the establishment of a comprehensive regulatory framework for the e-cigarette industry [1][2][3][4] Group 1: Regulatory Overview - Since the inclusion of e-cigarettes in regulation, a total of 19,896 administrative cases and 5,539 criminal cases have been handled, with 63.145 million illegal e-cigarette products seized and over 15 billion yuan involved in these cases [1][3] - The regulatory framework for e-cigarettes is based on the revised Tobacco Monopoly Law and includes the "1+2+N" system, which consists of the Tobacco Monopoly Law, the E-cigarette Management Measures, and mandatory national standards [1][2] Group 2: Market and Industry Dynamics - The e-cigarette market in China has seen a significant improvement in order, with key enterprises accounting for over 80% of domestic sales and nearly 60% of exports, indicating a rise in industry concentration and capacity utilization [4] - The introduction of a consumption tax on e-cigarettes since November 2022 aims to further regulate the industry and promote the exit of outdated production capacity [2] Group 3: Enforcement and Compliance - A comprehensive enforcement system has been established, focusing on online and offline control, resulting in the seizure of 63.145 million illegal products and the prosecution of 3,834 individuals [3] - The regulatory measures include a ban on the sale of flavored e-cigarettes and the inclusion of non-nicotine e-cigarettes under regulatory oversight, ensuring a broad scope of control [2] Group 4: International Cooperation - China is actively participating in the formulation of international e-cigarette standards, with experts involved in international standardization efforts and cooperation with countries like Australia and the EU to combat e-cigarette smuggling [3]

Core Viewpoint - The National Tobacco Monopoly Administration has implemented multiple rounds of special governance actions to regulate the electronic cigarette industry, focusing on protecting minors and combating illegal activities related to e-cigarettes [1] Group 1: Regulatory Actions - In 2021, the "Guarding Growth" special action was launched, followed by a crackdown on sales of e-cigarettes to minors in 2022 [1] - From 2022 to 2023, special governance actions targeting flavored e-cigarettes, such as "Milk Tea Cup" and "Cola Can," were conducted [1] - In 2024, a new initiative will focus on protecting minors from e-cigarette harm and addressing the online sale of mutated e-cigarette products [1] Group 2: Enforcement Statistics - Over the course of these governance actions, more than 25,000 e-cigarette retail outlets near primary and secondary schools and kindergartens have been cleared [1] - More than 1,200 cases of selling e-cigarettes to minors have been investigated [1] - A total of 19,896 administrative cases and 5,539 criminal cases related to e-cigarettes have been handled, with 63.145 million illegal e-cigarette products seized and over 15 billion yuan involved in the cases [1]

Group 1 - A criminal gang in Fuxin City was dismantled for mixing veterinary anesthetics into e-cigarette cartridges for profit after a three-month investigation by local police [1][3] - The investigation revealed a network involving a gang led by an individual named Zhou from Shenyang and local criminals led by Jiang and Kan in Fuxin, highlighting the organized structure of the operation [3] - On December 19, simultaneous operations in Fuxin and Shenyang resulted in the arrest of 10 suspects, the implementation of criminal coercive measures on 7 individuals, and the education of 58 individuals who had consumed the tainted e-cigarettes [3] Group 2 - The Chinese government is increasing regulatory scrutiny on e-cigarettes to combat issues related to counterfeit products, smuggling, and the sale of illegal e-cigarettes, as outlined in a recent directive from the State Council [5] - The directive emphasizes the need for comprehensive enforcement against illegal production, wholesale, transportation, and sales of e-cigarettes, particularly those involving addictive substances [5] - Fuxin's anti-drug unit plans to further investigate upstream suppliers of veterinary anesthetics and manufacturers of e-cigarette components to eliminate these illegal activities [5]

Core Viewpoint - The recent issuance of the "Opinions on Comprehensive Crackdown on Tobacco-related Illegal Activities" by the State Council aims to strengthen regulatory enforcement against tobacco counterfeiting, smuggling, and illegal sales, particularly focusing on the electronic cigarette sector [1][2][3]. Group 1: Regulatory Measures - The "Opinions" emphasize a comprehensive crackdown on the smuggling of tobacco products, including electronic cigarettes, by enhancing international law enforcement cooperation and targeting the sources of counterfeit tobacco abroad [1][2]. - There will be strict implementation of tobacco-related laws in special areas such as customs supervision zones and bonded areas, prohibiting the sale of tobacco products without proper licenses [2]. - The document outlines a full-chain regulatory system for tobacco production and sales, including the management of raw materials and machinery used in tobacco production [2][5]. Group 2: Focus on Electronic Cigarettes - The regulation of electronic cigarettes is highlighted, with a focus on combating illegal production, wholesale, transportation, and sales, as well as addressing issues related to non-nicotine electronic cigarettes [2][3]. - The market for electronic cigarettes is currently facing significant challenges from counterfeit products, many of which are imported from overseas, leading to a call for stricter regulatory measures [3][4]. Group 3: Legal Framework - The "Opinions" align with existing criminal laws, specifically targeting smuggling and the production and sale of counterfeit products, which are core offenses under the Criminal Law [5][6]. - The document stresses the need to sever the supply chain for counterfeit tobacco materials and machinery, reinforcing the legal framework for tackling tobacco-related crimes [5][6]. - Illegal operations, including unlicensed sales and the use of the internet for illegal tobacco sales, are identified as serious offenses that disrupt market order and violate the tobacco monopoly system [6].

Core Viewpoint - The State Council has issued an opinion aimed at combating illegal activities related to tobacco, including counterfeiting, smuggling, and sales, to purify the tobacco market and protect national interests and consumer rights [1][2]. Group 1: Measures Against Illegal Tobacco Activities - The opinion emphasizes the need to combat the overseas production and smuggling of counterfeit tobacco products, enhancing cooperation with relevant countries to crack down on counterfeit Chinese tobacco brands [1]. - It calls for strict enforcement against various forms of tobacco smuggling, including maritime and land border operations, and the regulation of special areas to prevent intellectual property infringement [1]. - The opinion also highlights the importance of managing risks associated with transportation tools and international mail to prevent tobacco smuggling [1]. Group 2: Domestic Enforcement and Regulation - The opinion mandates a crackdown on domestic illegal tobacco activities, including the disruption of supply chains for counterfeit tobacco materials and machinery [2]. - It outlines measures to address illegal storage, transportation, and sales of tobacco products, including online sales, and emphasizes the regulation of electronic cigarettes [2]. - The opinion stresses the need for a robust tobacco industry management system, enhancing the connection between administrative enforcement and criminal justice [2]. Group 3: Responsibilities and Coordination - The opinion calls for local authorities and relevant departments to prioritize the fight against illegal tobacco activities, ensuring that all tasks and measures are effectively implemented [2].

Core Viewpoint - Smoore International (06969.HK) experienced significant stock price volatility following the release of its Q3 2025 earnings report, which showed mixed results with high revenue growth but declining net profits [2][3]. Financial Performance - For Q3 2025, Smoore International reported revenue of approximately 4.197 billion RMB, marking a year-on-year increase of 27.2% and a quarter-on-quarter increase of 27.5% [3]. - The company's net profit for the same period was approximately 316.9 million RMB, reflecting a year-on-year decline of 16.4% but a quarter-on-quarter increase of 5.7% [3]. - Adjusted profit for Q3 was 444.2 million RMB, showing a year-on-year growth of 4.0% and a quarter-on-quarter growth of 4.8% [3]. Business Segments - Smoore International operates primarily in two business segments: 1. Business-to-Business (B2B) services, providing electronic vaporization devices and HNB (Heated Not Burn) solutions to global tobacco giants 2. Research, design, manufacturing, and sales of proprietary electronic vaporization products and vaporization beauty products [4]. Revenue Drivers - The revenue growth was attributed to the strong performance of the B2B segment and the proprietary brand business, with significant increases in product shipments and successful launches of new compliant electronic vaporization products [5]. - The proprietary brand business also saw healthy growth due to successful product iterations and increased marketing efforts tailored to local markets [5]. Profitability Challenges - Despite strong revenue growth, Smoore International faces significant pressure on profitability due to rising costs associated with global market expansion, compliance, R&D, and marketing [5]. - Analysts remain cautious about the company's future profit outlook, with expectations of a 40% decline in net profit year-on-year for 2025, despite a projected 20% revenue growth driven by electronic cigarette sales [6].

Investment Rating - Industry rating is maintained at "Outperform the Market" [5] Core Insights - The report highlights the implementation of new regulations on e-cigarettes across multiple states in the U.S. starting September 1, 2025, aimed at enhancing public health and product safety [1] - China's e-cigarette exports showed a steady recovery in July 2025, with an export value of $889 million, reflecting a month-on-month increase of 32.04% despite a year-on-year decline of 11.10% [2] - The report suggests a significant restructuring of the e-cigarette market in the U.S. due to stricter regulations, which may lead to a reduction in product variety and changes in supply chain and marketing strategies [1] Summary by Sections E-Cigarette Regulations - New regulations in states like Texas, Wisconsin, Arkansas, and California impose strict limits on product packaging, ingredients, origin, and advertising, with severe penalties for non-compliance [1] Export Data - In the first seven months of 2025, China's e-cigarette exports totaled $5.616 billion, with July exports reaching $889 million, showing a notable recovery in the U.S. market [2] - The U.S. remains the largest market for Chinese e-cigarettes, accounting for 29.41% of total exports, despite a year-on-year decline of 14.17% [2] Investment Opportunities - The report recommends focusing on companies within the vaping supply chain, including Smoore International, Jincheng Pharmaceutical, and others, as well as tobacco supply chain companies like China Tobacco Hong Kong and China Baotong [3]

Core Viewpoint - The Huangpi District Tobacco Monopoly Bureau is implementing strict regulations on e-cigarettes to protect minors' health, focusing on policy promotion, joint law enforcement, and source governance to combat illegal sales [1][2]. Group 1: Policy Promotion - The bureau is enhancing regulatory measures through a combination of online and offline methods, expanding the reach of e-cigarette legal knowledge [1]. - Online platforms such as official accounts and SMS are used to disseminate information, while offline efforts include direct outreach to retailers to explain regulations against selling to minors [1]. - Warning signs are posted around retail stores and schools to create a strong awareness atmosphere, leading to improved understanding of regulations among retailers and consumers [1]. Group 2: Joint Law Enforcement - The bureau collaborates with market regulation and public security departments to conduct special inspections in key areas like schools and youth activity centers [1]. - During inspections, the bureau verifies licenses, supply chains, and sales records to combat illegal production and sales of counterfeit products [1]. - A specific case involved a store selling to minors, which was penalized and required to rectify its practices, demonstrating effective law enforcement deterrence [1]. Group 3: Source Governance - The bureau focuses on cutting off illegal transactions by monitoring online sales of e-cigarettes, utilizing advanced tools for real-time analysis of social media and online platforms [2]. - Upon discovering illegal sales, the bureau collaborates with relevant departments to take precise action against identified illegal products [2]. - As a result of these efforts, the e-cigarette market order in Huangpi District has improved, with a reduction in sales points near schools and a significant decrease in illegal online sales [2]. Group 4: Future Directions - The bureau acknowledges ongoing challenges in e-cigarette regulation and plans to continue monitoring new trends, innovate work methods, and strengthen inter-departmental collaboration [2]. - There will be an emphasis on public education regarding the dangers of e-cigarettes to foster a community-wide participation in regulation efforts [2].

Core Points - The Singapore government announced stricter penalties for e-cigarette violations starting September 1, particularly targeting the use and sale of e-cigarettes containing banned substances [1] - The new regulations classify "etomidate" as a Class C drug under the Misuse of Drugs Act, with a temporary enforcement period of six months [1] - Individuals caught possessing, using, or purchasing e-cigarettes with harmful substances will face increased fines and mandatory rehabilitation programs, with repeat offenders facing harsher penalties [1] Regulatory Changes - Starting September 1, penalties for holding, using, or purchasing e-cigarettes will be increased, with first-time offenders facing higher fines and repeat offenders required to undergo a three-month rehabilitation program or face more severe penalties [1] - The maximum punishment for importing, selling, or distributing e-cigarettes containing etomidate includes up to 15 strokes of the cane and a maximum of 20 years in prison [1] Health Concerns - Etomidate is a sedative drug typically used for intravenous anesthesia, and its consumption through e-cigarettes can lead to severe side effects such as nausea, vomiting, seizures, and in severe cases, organ failure or death [2]