Core Viewpoint - The recent launch of Glo Hilo and Glo Hilo Plus heating non-combustible devices in Poland marks a significant step in the expansion of HNB (Heated Not Burned) business, with a focus on diverse product offerings and market penetration strategies [1][2]. HNB Business Expansion - Glo Hilo has been launched in Japan since September 1, with positive trial feedback and higher-than-expected shipment volumes [1]. - In Poland, Glo Hilo was officially released on September 18, featuring improved device options and a wider variety of 13 flavored smoke sticks (8 tea-based and 5 tobacco flavors) [1]. - Marketing efforts include a promotional campaign by British American Tobacco, offering four packs of smoke sticks with the purchase of heating devices [1]. - Future expansion plans include entering the Italian market in 2024, which is projected to be the third-largest global HNB market [1]. Vaping Market Dynamics - The U.S. has intensified regulation of the illegal vaping market, with a significant seizure of unauthorized electronic cigarette products valued at approximately $86.5 million [2]. - Exports of electronic cigarettes from China to the U.S. are expected to decline by about 23% year-on-year from May to August 2025, primarily due to tightening regulations and tariffs [2]. - In Europe, the company is responding to a ban on disposable products by quickly launching innovative compliant products, which is anticipated to drive business growth and improve product structure [2]. Growth Potential and Financial Forecast - The vaping segment shows a clear recovery trend, benefiting from regulatory shifts and increased market share among major clients [3]. - The HNB business has significant growth potential, with Glo Hilo expected to capture market share in a sector where global penetration is currently only about 6% [3]. - Long-term growth prospects are bolstered by developments in medical vaping, special-purpose vaping, and beauty vaping, with notable progress in obtaining medical device certifications [3]. - The company forecasts net profits of 1.3 billion, 2.04 billion, and 2.89 billion yuan for 2025-2027, corresponding to P/E ratios of 78, 50, and 35 [3].

Investment Rating - The investment rating for the company is "Buy" and is maintained [9] Core Viewpoints - The Glo Hilo new market is steadily advancing, with the vaporization business expected to recover rapidly. The Glo Hilo products have been launched in Poland and Japan, with positive initial feedback and promotional activities in place [10][10] - The company is well-positioned to benefit from regulatory changes in the U.S. market, which may lead to growth opportunities for its vaporization business [10] - The overall growth potential of the company is strong, driven by the recovery of its main business and the expansion of its HNB (Heated Not Burned) products [10] Summary by Relevant Sections HNB Business - Glo Hilo has launched in Japan and Poland, with positive sales feedback and a variety of product offerings including 13 flavors of tobacco and tea-based sticks [6][10] - The marketing strategy includes promotional offers to boost initial sales [10] Vaporization Business - The U.S. market is seeing increased regulation of illegal products, which may provide a favorable environment for compliant products [10] - The company has introduced innovative compliant products to meet market demand, which is expected to drive growth [10] Fundamental Trends - The recovery trend in the vaporization business is clear, with expectations of accelerated growth due to improved market share among major clients [10] - The company anticipates significant growth in the HNB segment, with a current global market penetration of only about 6% [10] - Long-term growth opportunities are also present in medical and specialty vaporization products [10] Profit Forecast - The company is projected to achieve net profits of 1.3 billion, 2.04 billion, and 2.89 billion RMB for the years 2025 to 2027, with corresponding PE ratios of 78, 50, and 35 [10]

Core Viewpoint - The company's 1H25 performance aligns with expectations, showing revenue growth but a decline in net profit, indicating a mixed financial outlook amid evolving market conditions [1][2]. Financial Performance - Revenue for 1H25 reached 6.01 billion, an 18.3% year-on-year increase, while net profit attributable to shareholders was 500 million, a 30.8% decline. Adjusted net profit after stock incentive expenses was 740 million, down 2.1% [1]. - The company declared an interim dividend of 0.2 HKD per share, with a payout ratio of 225.1%, significantly higher than the 38.7% in 1H24, indicating increased shareholder returns [1]. Market Trends - The ToB revenue grew by 19.5% to 4.739 billion, driven by strong performance in Europe and potential improvements in the U.S. market due to stricter regulations [1]. - In Europe, revenue surged by 38% to 2.73 billion, benefiting from regulatory changes that favored compliant companies [1]. - U.S. revenue increased by 1.5% to 1.89 billion, with expectations of continued improvement as enforcement tightens [1]. - Domestic revenue, however, saw a decline of 6.1% to 120 million [1]. Product Development - The ToC revenue rose by 14.1% to 1.274 billion, with significant growth in the APV segment, particularly in Europe, where new product launches are driving user conversion [2]. - The APV revenue in Europe and the U.S. was 1.07 billion and 170 million, respectively, with declines of 15.1% and 6.7% [2]. - The nebulization beauty segment experienced a remarkable growth of 2595% to 30.618 million, with over 10,000 C-end users and more than 100 B-end partnerships established [2]. Profitability and Costs - The overall gross margin remained stable, decreasing slightly by 0.5 percentage points to 37.3%. However, the net profit margin fell by 5.9 percentage points to 8.3%, and adjusted for stock incentive expenses, it decreased by 1.2 percentage points to 12.3% [2]. - Sales expense ratio increased by 0.8 percentage points to 8.2% due to heightened investment in self-owned brands, while R&D expense ratio decreased by 2.9 percentage points to 12% [2]. - Management expenses rose significantly by 15.5 percentage points to 22.2%, primarily due to increased stock incentive costs [2]. Growth Outlook - The HNB segment is expected to accelerate globally, with Glo Hilo's market share in Japan increasing by 1.5% during its sales period, indicating strong growth potential [3]. - The regulatory environment for vaping products in Europe and the U.S. is expected to lead to a more standardized industry, allowing the company to recover market share and continue growing [3]. - The company is also focusing on developing nebulization medical products and expanding its nebulization beauty segment domestically, which opens up additional growth opportunities [3]. Profit Forecast and Valuation - The company maintains its profit forecast and industry outperform rating, with a target price reflecting a 4% upside from the current stock price [3].