Core Viewpoint - Altria (MO.US) experienced a decline of over 7% on Thursday, retreating 14% from its historical high in August, currently trading at $57.07 [1] Financial Performance - The company reported an adjusted earnings per share (EPS) of $1.45 for the third quarter, a 4% increase from $1.40 in the previous year, aligning with market consensus [1] - Net revenue decreased by 1.7% to $5.25 billion, falling short of market expectations by $50 million, primarily due to higher prices not fully offsetting a decline in sales [1] - Sales volume for combustible products dropped by 8.0%, while oral tobacco product sales fell by 9.6% [1] Guidance and Future Outlook - Altria raised its full-year adjusted EPS guidance from $5.35-$5.45 to $5.37-$5.45, indicating an expected fourth-quarter adjusted EPS of $1.25-$1.33, compared to the current market consensus of $1.33 [1] - Management noted that due to an accelerated stock buyback plan in 2024 and the diminishing benefits from the "Master Settlement Agreement" legal fund, growth in the fourth quarter is expected to slow down [1]

Market Overview - The Hong Kong stock market is experiencing a shift in capital flow, moving from growth to a more defensive positioning amid a collective decline in the three major indices [1] - On October 28, the market failed to maintain the previous day's gains, with a trading volume of 242.7 billion HKD, indicating a cautious investor sentiment [1] Sector Performance - The gold sector faced significant declines, with multiple stocks experiencing steep drops: China Silver Group fell over 10%, Lingbao Gold down 5.74%, and Zijin Mining down 5.59% [3] - The drop in gold stocks is closely linked to the international gold price, which fell 3.05% on October 27, dropping below 3990 USD per ounce [3] - The new consumption sector, once favored, is now seeing substantial outflows, with leading stocks like Pop Mart down over 32% from their historical highs [6] - The technology sector also showed weakness, with major stocks like NetEase and Meituan declining by 2.35% and 1.96% respectively [8] Capital Flow - There has been a notable shift in capital flow, with southbound funds moving from net inflows to significant outflows in the consumer sector, redirecting towards technology and healthcare [8] - Despite the overall market downturn, local bank and insurance stocks performed well, with HSBC rising 4.41% due to better-than-expected quarterly results [10] Investment Sentiment - The market is witnessing a rotation from high-growth, high-valuation sectors to defensive assets, reflecting a change in investor risk appetite [10] - Continuous inflows from southbound funds, totaling 2.258 billion HKD on October 28, indicate mainland investors' recognition of the long-term value in Hong Kong stocks [12] Economic Outlook - Analysts suggest that potential interest rate cuts by the Federal Reserve and a depreciating USD alongside an appreciating RMB could support the valuation of Chinese assets, benefiting the Hong Kong market [14] - The significant pullback in gold stocks and the weakness in consumer stocks illustrate a clear picture of declining risk appetite in the current market environment [14]

Core Insights - The economic growth of the southwestern provinces of China, particularly Guizhou, Yunnan, Sichuan, and Chongqing, has slowed down significantly compared to previous years, with Guizhou's GDP growth falling to 4.9% in the first three quarters of 2023, below the national average of 5.2% [1][2][3] Economic Performance - Guizhou's GDP for the first three quarters of 2023 reached 17,352.04 billion yuan, with a year-on-year growth of 4.9%. The breakdown of GDP growth by sector shows the primary industry grew by 4.3%, the secondary industry by 5.4%, and the tertiary industry by 4.8% [1][2] - Yunnan's GDP growth has also declined, with a growth rate of 4.4% in 2023, falling below the national average [3] - Sichuan and Chongqing have shown some recovery, with projected growth rates of 5.7% for Chongqing and 5.5% for Sichuan in 2024, both exceeding the national average [3] Investment Trends - Investment growth has been a significant factor in the economic slowdown of the southwestern provinces. Guizhou's fixed asset investment growth has drastically decreased, showing negative growth in recent years, with a notable decline of 5.7% in 2023 [4][5] - Yunnan's fixed asset investment has also faced challenges, with a decline of 10.6% in 2023, primarily due to a downturn in real estate development investment [4][5] Industry Challenges - Traditional pillar industries in the region, such as alcohol, coal, electricity, and tobacco, are facing significant challenges. The white liquor industry in Guizhou is undergoing deep adjustments, impacting overall economic performance [5] - In Yunnan, while the growth in traditional industries remains low, the non-ferrous metals industry has shown a notable increase, with a growth rate of 14.6% contributing significantly to industrial growth [5]

Core Viewpoint - The economic growth rates of the southwestern provinces of China, including Yunnan, Guizhou, Sichuan, and Chongqing, have declined significantly in recent years, with all four provinces experiencing growth rates below the national average in 2023 and 2024 [4][5][6]. Economic Performance - In the first three quarters of this year, the GDP of Yunnan, Guizhou, Sichuan, and Chongqing was reported at 23,518.47 billion, 17,352.04 billion, 49,322.2 billion, and 24,449.36 billion respectively, with year-on-year growth rates of 4.3%, 4.9%, 5.5%, and 5.3% [3][5]. - Guizhou's GDP growth has fallen below the national average, with a reported growth of 4.9% in the first three quarters, down from previous years [5][6]. - Yunnan's growth rate has also declined, with a 2023 growth of 4.4%, below the national level of 5.2% [6]. Investment Trends - Investment growth has been a significant factor in the economic slowdown of the southwestern provinces, with fixed asset investment in Guizhou showing a downward trend from 28.0% in 2013 to -5.7% in 2024 [8][9]. - Yunnan has also faced a decline in fixed asset investment, with growth rates of 7.5%, -10.6%, and -7.7% from 2022 to 2024, largely due to a drop in real estate development investment [8][9]. Industry Challenges - Traditional pillar industries in the region, such as alcohol, coal, electricity, and tobacco, are facing challenges, particularly in Guizhou where the liquor industry is undergoing significant adjustments [9]. - In Yunnan, while some traditional industries are seeing slight growth, the overall contribution to industrial growth remains low, with the tobacco industry growing by only 1.0% [9].

Core Insights - The economic growth of the four southwestern provinces (Yunnan, Guizhou, Sichuan, and Chongqing) has significantly declined in recent years, with their GDP growth rates falling below the national average [1][2][3][4] Economic Performance - In the first three quarters of this year, the GDP figures for the four provinces were as follows: Yunnan at 23,518.47 billion, Guizhou at 17,352.04 billion, Sichuan at 49,322.2 billion, and Chongqing at 24,449.36 billion, with respective year-on-year growth rates of 4.3%, 4.9%, 5.5%, and 5.3% [1][2] - Guizhou's GDP growth has dropped below the national average, with a forecasted growth of 5.3% for 2024, which is only 0.3 percentage points higher than the national average [2][4] - Yunnan's growth has also declined, with a forecast of only 3.3% for 2024, placing it at the bottom of the national growth rankings [2][3] Investment Trends - Investment growth has been a significant factor in the economic slowdown of the southwestern provinces, with a notable decline in fixed asset investment [4][5] - Historical data shows that Guizhou's fixed asset investment growth has decreased from 28.0% in 2013 to negative growth in recent years, indicating a shift from being a leader to one of the provinces with negative growth [4] - Yunnan's fixed asset investment has also suffered, with declines of 10.6% and 7.7% in 2022 and 2023, respectively, largely due to a downturn in real estate development investment [4][5] Sector Performance - The traditional pillar industries in the region, such as alcohol, coal, electricity, and tobacco, are facing challenges, particularly in Guizhou, where the liquor industry is undergoing significant adjustments [5] - In the first three quarters, Guizhou's coal mining and washing industry grew by 8.0%, while the electricity and heat production sector grew by 4.1% [5] - Yunnan's traditional industries are also experiencing low growth rates, with the tobacco industry increasing by only 1.0% and the electricity sector by 1.8%, although the non-ferrous metals industry saw a significant increase of 14.6% [5]

Core Viewpoint - China is the largest traditional tobacco market globally, while the US leads in the new tobacco market, with Japan and South Korea also holding significant shares in the new tobacco sector [1][3] Group 1: Market Dynamics - The traditional tobacco market is gradually shrinking, while the new tobacco market is experiencing rapid growth. In 2020, the market size of heated not-burn (HNB) products surpassed that of electronic cigarettes, establishing itself as the new leader in the new tobacco sector [2] - The US market currently leads in vaporized electronic cigarettes but has a significant gap in the HNB market. The resolution between PMI and BAT is expected to accelerate the development of the HNB market [3] - The regulatory environment in Europe is tightening for vaporized products while remaining stable for HNB, which may allow HNB to gradually capture a larger market share [3] Group 2: Product Landscape - The transition from traditional cigarettes to new tobacco products is driven by a dual focus on flavor and health, with new tobacco products offering significant harm reduction advantages and more diverse taste options [2] - Major multinational tobacco companies are actively investing in new tobacco products, which is likely to increase the penetration rate of these products in the market [2] Group 3: Compliance and Regulation - The structure of tobacco products and their acceptance in different countries is largely determined by national policies and regulations. Taxation influences the differing policy attitudes towards traditional and new tobacco products, while health concerns shape the regulatory stance on various new tobacco products [4] - Strict regulations and weak enforcement may lead to unintended consequences, such as the growth of the illegal electronic cigarette market [4] Group 4: Brand Landscape - The traditional tobacco market is highly concentrated, dominated by brands like Marlboro, Winston, and Camel. In the new tobacco sector, PMI and BAT hold leading market shares, but changes in policy and company strategies may alter the brand landscape [5] Group 5: Industry Chain - The tobacco supply chain includes essential materials for both cigarette and electronic cigarette production, such as cigarette labels, rolling paper, and electronic cigarette components like lithium batteries and control chips. Key listed companies in this supply chain include Jinjia Co., Dongfeng Co., and others [8]

Summary of Key Points from the Conference Call Industry or Company Involved - The conference call primarily discusses the U.S.-China trade relations and the implications of the fifth round of economic talks between the two countries. Core Insights and Arguments - **Progress in U.S.-China Talks**: The fifth round of economic talks in Kuala Lumpur showed significant progress on key issues such as tariff reductions, procurement agreements, and cooperation on fentanyl enforcement, indicating a move towards more substantive discussions compared to previous meetings [2][3][4] - **Tariff Suspension**: The U.S. is likely to extend the tariff suspension period until mid-November, and some aggressive measures, such as software controls, will be temporarily paused [3][4] - **Fentanyl Export Reduction**: A preliminary consensus was reached on fentanyl, with an expected reduction of about 10% in exports, although complete cancellation remains challenging [3][4] - **Agricultural Trade**: China is expected to purchase U.S. soybeans, with potential procurement amounts reaching $50 billion, reflecting a shift towards rationalized trade relations [3][17] - **Leadership Visits**: Key dates for leadership visits were established, with Trump planning to visit China before the Lunar New Year in 2026 and the Chinese President attending the G20 summit in the U.S. later that year, indicating frequent high-level interactions [5][26] Other Important but Possibly Overlooked Content - **U.S. Agricultural Pressure**: The U.S. is exerting pressure on China to increase agricultural purchases, particularly soybeans, due to a significant drop in Chinese imports since March [7][8] - **Supreme Court Challenges**: The Trump administration faces legal challenges regarding tariff policies, with the Supreme Court reviewing cases that could potentially overturn these tariffs, significantly impacting trade strategies [10][11][12] - **Market Reactions**: The U.S. stock market has shown resilience, with strong performances from major companies, suggesting a potential soft landing for the economy despite tariff impacts [21][22] - **Global Investment Climate**: The global investment environment is improving, aided by easing tensions in U.S.-China relations and a cooling of geopolitical conflicts, which may enhance investor confidence [23] - **Future Trade Dynamics**: If the Supreme Court rules against Trump, it could lead to a rebound in U.S.-China trade, particularly in agricultural sectors, while also affecting U.S. fiscal policies [15][19] This summary encapsulates the essential points discussed in the conference call, highlighting the ongoing developments in U.S.-China trade relations and their broader implications for the market and economy.

Investment Rating - Industry rating is maintained as "Outperform the Market" [7] Core Insights - PMI reported a strong performance in the third quarter of 2025, with revenue reaching $30.3 billion, a year-on-year increase of 7.5%, and gross profit of $20.5 billion, up 12.1% [1] - Smoore achieved record quarterly revenue of $4.197 billion in Q3 2025, marking a 27.2% year-on-year growth [3] - The strong growth in PMI's reduced-risk products, particularly Nicotine Pouches, is a key driver of performance, with shipments increasing by 25.8% year-on-year [2] - Smoore's HNB (Heated Not Burned) business has seen significant growth, supported by successful product launches in international markets [4] Summary by Sections PMI Financial Performance - For the first three quarters of 2025, PMI's revenue was $30.3 billion, with a gross profit of $20.5 billion, and an adjusted diluted EPS of $2.24, reflecting a 17.3% increase [1] - In Q3 alone, revenue was $10.8 billion, with an operating profit of $4.3 billion, showing a 16.7% increase [1] PMI Product Performance - PMI shipped 940 million cans of oral tobacco products in the first three quarters, a 25.8% increase, with Q3 shipments at 313 million cans, up 20.2% [2] - Nicotine Pouches shipments reached 663 million cans in the first three quarters, a 44.0% increase [2] Smoore Financial Performance - Smoore's revenue for the first three quarters was $10.21 billion, a 21.8% increase, with adjusted profit at $1.182 billion, a slight increase of 0.1% [3] - The third quarter revenue of Smoore was a record $4.197 billion, with adjusted profit of $444 million, reflecting a 4.0% year-on-year growth [3] Smoore Product Performance - Smoore's HNB and e-cigarette businesses showed healthy growth, with strategic support for clients leading to increased product launches and compliance with regulations [4] - The introduction of new products and localized marketing efforts have contributed to the growth of Smoore's proprietary brand business [4] Regulatory Environment - Customs authorities in Ningbo and Huangpu seized 265,140 boxes of infringing "ZYN" products, which is expected to strengthen the legitimate supply chain and benefit the compliant oral tobacco industry [5]

Core Insights - The article emphasizes the clear upward trend in the new tobacco industry driven by supply and demand dynamics, leading to accelerated expansion and increased involvement from international tobacco giants [1][2]. Industry Trends - The new oral tobacco products, which combine characteristics of heated non-combustible (HNB) and vaporized electronic cigarettes, are gaining popularity globally due to their ability to address traditional tobacco's limitations [2]. - New oral tobacco products are expected to gradually replace traditional products, similar to how HNB products have replaced cigarettes, while also attracting a new customer base with diverse flavor options [2]. - The tax environment for non-tobacco products is more favorable, and the competition is less intense compared to vaporized electronic cigarettes, leading to higher expected profit margins for new oral tobacco products [2]. Competitive Landscape - The market for new oral tobacco products has low entry barriers, but the market share remains concentrated among international tobacco companies, with no significant changes expected in the competitive landscape [3]. - The established customer base and sales channels of international tobacco companies, built over years of traditional oral tobacco operations, create a path dependency that hinders new entrants [3]. - The regulatory environment is stable and favorable for new oral tobacco products, as they pose lower public health risks compared to vaporized electronic cigarettes, which helps maintain a level playing field among brands [3]. Company Developments - Philip Morris International (PMI) made a significant move by acquiring the parent company of ZYN, a leading brand in new oral tobacco, for $16 billion, indicating strong confidence in the industry's future [4]. - The FDA's approval of 20 ZYN products for market release in January 2025, including various flavors, further supports the positive outlook for the industry [4]. - The online distributor Haypp has provided optimistic guidance for its 2025 performance, reinforcing the industry's high growth potential [4].

Investment Rating - The report assigns an "Overweight" rating for the new tobacco industry, particularly focusing on the new oral nicotine pouch segment [3]. Core Insights - The industry is experiencing clear trends driven by supply-demand dynamics, leading to accelerated growth in the new tobacco sector, with international tobacco giants increasing their investments [2]. - New oral nicotine products, which combine characteristics of heated non-combustible and vaporized electronic cigarettes, are gaining popularity due to their flavor variety and convenience, presenting a significant market opportunity [3][58]. - The report highlights that the new oral nicotine segment is expected to have the highest gross margins among new tobacco products, making it an attractive area for investment [3]. Summary by Sections 1. Oral Tobacco Industry - The global penetration rate for oral tobacco is currently at 1%, with a projected CAGR of 27% from 2023 to 2028, indicating strong growth potential [18][58]. - New oral nicotine products are expected to grow at a CAGR of 35% during the same period, with the market size reaching €15 billion by 2028 [18]. 2. Traditional Oral Tobacco - Traditional oral tobacco products have a focused audience and are primarily used in specific scenarios, with historical roots in Sweden and North America [54]. 3. New Oral Tobacco - The introduction of nicotine pouches, such as ZYN by Swedish Match, has marked the beginning of a new market segment, with significant growth observed in the U.S. market [58]. - The new oral tobacco products are characterized by their non-tobacco composition, lower health risks, and a variety of flavors, which cater to diverse consumer preferences [58][61]. 4. Industry Leaders - **Philip Morris International (PMI)**: After acquiring Swedish Match for $16 billion, PMI has established itself as a global leader in the new oral tobacco market, with a market share of 42% [76][78]. - **Altria**: Focused on the U.S. market, Altria's new oral tobacco brand "On!" has seen a CAGR of 49% from 2021 to 2024 [81]. - **British American Tobacco (BAT)**: Concentrating on the European market, BAT holds a significant share in the new oral tobacco segment, particularly in six core markets [84]. - **Haypp Group**: A leading online sales platform for nicotine pouches, Haypp is expected to achieve a revenue of 5 billion Swedish Krona in 2025, reflecting the industry's high growth potential [90][93]. 5. Valuation Review - The new oral tobacco segment is becoming a crucial valuation driver for companies in the tobacco industry, with significant investments and acquisitions indicating strong future prospects [3][22].