Company Developments - RLX Technology has completed the sample preparation for its self-developed oral nicotine product in 2024, with plans to launch it in the European and American markets by 2026, aiming to expand the smokeless tobacco product market through more convenient usage [2] - The company has initiated the "Seeing Love: Guide Dog Partner Program," which will run from 2025 to 2026, planning to donate 4 million yuan for the training, medical care, and education of 20 guide dogs, with the first batch of 10 guide dogs delivered in 2025 [3] Business Progress - According to the Q3 2025 financial report, RLX Technology's international business revenue has reached 72%, with ongoing expansion in the Asia-Pacific and European markets through mergers and acquisitions, such as the completion of a European acquisition in May 2025, indicating a potential for further localization efforts [4] Product Development - In addition to the oral nicotine product, the company has launched nicotine oral films in the U.S. market and continues to develop heat-not-burn (HNB) and other new tobacco products to expand its global product matrix [5]

Investment Rating - The report maintains a "Buy" rating for the HNB industry, indicating a positive outlook based on favorable market conditions and consumer preferences [1][45]. Core Insights - The Japanese HNB market is one of the largest globally, reaching a scale of 10 billion USD in 2023, driven by stable policies and changing consumer habits [6][9]. - The market exhibits an oligopolistic structure dominated by key players such as PMI, JT, and BAT, with a CR2 exceeding 70% [30][29]. - Continuous product iteration among major manufacturers is expected to sustain growth, with new product launches anticipated to create additional market opportunities [38][34]. Summary by Sections Japanese HNB Market Overview - The Japanese HNB market is the largest globally, with a market size of 10 billion USD in 2023, reflecting a growth rate of over 10% from 2020 to 2023 [9][6]. - A stable policy environment supports HNB product growth, with favorable regulations and lower tax rates compared to traditional cigarettes [13][14]. - HNB penetration rates have surpassed 40% overall and 50% in major cities by 2024, indicating significant growth potential [22][27]. Market Structure - The Japanese HNB market is characterized by an oligopolistic structure, with PMI holding over 60% market share, followed by JT and BAT [30][34]. - Each major player has core products that drive growth through continuous innovation, with differences in heating technology and user experience [34][38]. - A new product iteration cycle is expected in 2025, with BAT's Glo Hilo set to launch, potentially enhancing market penetration and competitive positioning [38][39]. Consumer Preferences and Trends - Japanese consumers show a strong preference for innovative and healthier smoking alternatives, which aligns with the characteristics of HNB products [17][19]. - The demand for low-tar and low-nicotine products is increasing, and HNB products are gaining acceptance in various social settings [17][18]. - The trend towards stylish and technologically advanced products is driving the growth of HNB consumption among urban consumers [19][20].