Investment Rating - The industry investment rating is "Positive" [2] Core Insights - The report highlights that major overseas tobacco companies, British American Tobacco and Japan Tobacco, have released their annual reports, indicating a slowdown in the market share growth of PLOOM and an acceleration in the iteration of new products by British American Tobacco [2] - British American Tobacco reported a revenue of £13.54 billion for the second half of 2025, a year-on-year increase of 0.1%, with new products contributing £1.97 billion, representing a 10.6% increase and accounting for 14.5% of total revenue [2] - Japan Tobacco's revenue for the fourth quarter of 2025 was ¥833.6 billion, a year-on-year increase of 10.2%, with new products generating ¥3.12 billion, a 34.5% increase, and accounting for 3.7% of total revenue [2] Summary by Sections British American Tobacco - The company experienced accelerated growth in new products in the second half of 2025, with revenue from vapor products decreasing by 5.5% year-on-year but increasing by 9.2% quarter-on-quarter [3] - The heat-not-burn (HNB) segment saw a revenue decline of 2.1% year-on-year, but the premium series HILO's increased market share helped maintain price levels [3] - Revenue from oral tobacco reached £700 million in the second half of 2025, with a significant year-on-year increase of 54.8%, driven by the nationwide launch of VELO PLUS [3] Japan Tobacco - Japan Tobacco's new product sales reached 3.9 billion units in the fourth quarter of 2025, a year-on-year increase of 30.0%, with HNB sales at 3.2 billion units, up 40.7% [4] - The market share of PLOOM in Japan was 15.7% in the fourth quarter of 2025, showing a slowdown in growth compared to previous quarters [4] - The company is expanding its global market presence, with new product launches in 19 countries as of February 2026 [4] Product Optimization and Global Expansion - Both British American Tobacco and Japan Tobacco plan to accelerate the global expansion of new products in 2026, despite anticipated intense competition in other regions [5] - Innovations in product features and differentiated consumption experiences are expected to enhance industry penetration rates [5] - British American Tobacco is set to launch a new HYPER device in the second quarter of 2026, which promises improved performance and user experience [5]

Summary of Conference Call Records Industry Overview - The conference call discusses the performance of major players in the tobacco industry, specifically British American Tobacco (BAT) and Japan Tobacco Inc. (JT) as they release their annual reports [1][2]. Key Points from British American Tobacco (BAT) - **H2 Revenue**: BAT reported H2 revenue of £13.54 billion, reflecting a year-on-year increase of 0.1% [1]. - **New Products Revenue**: Revenue from new products reached £1.97 billion, up 10.6% year-on-year, accounting for 14.5% of total revenue, an increase of 1.4 percentage points [1]. - **HILO Impact**: The introduction of the HILO product line has contributed to an increase in average prices, with an optimistic outlook for 2026 [1][4]. Key Points from Japan Tobacco Inc. (JT) - **Q4 Revenue**: JT reported Q4 revenue of ¥833.6 billion, a year-on-year increase of 10.2% [1]. - **New Products Revenue**: Revenue from new products was ¥312 billion, up 34.5% year-on-year, representing 3.7% of total revenue, an increase of 0.7 percentage points [1]. - **PLOOM Market Share**: The market share for PLOOM in Japan was reported at 15.7% for Q4, showing a slowdown in growth compared to previous quarters [3]. Product Performance Insights - **HNB Segment**: The HNB (Heated Not Burned) segment saw a decline in revenue and sales volume, with a year-on-year decrease of 2.1% and 10.0% respectively. However, the high-end HILO series is helping to maintain price levels [2]. - **Vapor Products**: Revenue from vapor products reached £700 million in H2, with a significant increase of 54.8% year-on-year, driven by the launch of VELO PLUS in the U.S. [2]. - **Global Expansion**: JT is accelerating its global market expansion, with new product launches in 19 countries, including the AURA product line [3][4]. Competitive Landscape - **Increased Competition**: The competition in the market is intensifying, particularly with the introduction of new products like HILO, which has affected the growth rate of PLOOM [3]. - **Market Penetration**: The penetration rates for HNB products are expected to rise, with projections of 38.0%, 42.8%, and 46.4% for the years 2023, 2024, and 2025 respectively [4]. Risks and Challenges - **Industry Risks**: Potential risks include intensified competition, regulatory changes, and the possibility that global penetration rates may not meet expectations [5].

Summary of Conference Call Notes Company and Industry Involved - The notes focus on **Smoore International**, a key player in the **Heat-Not-Burn (HNB)** tobacco product industry, particularly in relation to its upcoming product launch in Serbia and its competitive positioning against other tobacco companies like PMI and British American Tobacco [1][2]. Core Points and Arguments - **Upcoming Product Launch**: Smoore International is set to unveil its new product, PLUS, on February 2, which is expected to address previous user pain points and enhance performance across multiple dimensions [1]. - **HNB Market Dynamics**: The global penetration rate of HNB products is accelerating, highlighting the urgent need for tobacco companies to transform. Currently, only PMI has a complete HNB research and production chain, while British American Tobacco and others rely on external suppliers [1]. - **Innovation Challenges**: The high difficulty of HNB research and innovation, compounded by PMI's strong patent protections, results in a scarcity of mature commercial solutions globally. Many new solutions are still far from mass production [1]. - **Smoore's Competitive Edge**: HILO, Smoore's product, is the only one comparable to IQOS and has completed an innovation upgrade within a year. This solidifies Smoore's position as a core technology provider in the HNB market [2]. - **Market Growth Potential**: The company is expected to replicate the growth curve seen in the vaping sector, with significant growth potential as it attracts more customers and strengthens ties with existing partners like British American Tobacco [2]. - **Catalysts for Growth**: Upcoming reports from British American Tobacco, Smoore's annual report, new customer acquisitions, and regulatory changes in the U.S. vaping market are anticipated to drive growth. Notably, Walgreens has resumed electronic cigarette sales for the first time since 2019, indicating a more favorable regulatory environment [2]. - **Valuation Insights**: The value of Smoore is estimated to be between **70-80 billion HKD**, suggesting a strong investment opportunity, especially for those looking to buy at lower prices [2]. Other Important but Potentially Overlooked Content - The urgency for transformation in the tobacco industry is underscored by the increasing global demand for HNB products, which may lead to a shift in market dynamics and competitive strategies among major players [1]. - The mention of regulatory changes in the U.S. market could signal a broader trend towards normalization and acceptance of vaping products, which may benefit Smoore and its peers in the long run [2].

Investment Rating - The investment rating for Smoore International (6969.HK) is not explicitly stated in the provided documents, but the report suggests a positive outlook based on market developments and company performance [1]. Core Viewpoints - The marketing promotion of HILO in Japan is expected to accelerate, while the compliance market in the US is showing signs of recovery [1]. - The competitive landscape in Japan is intensifying, with major players like Philip Morris and British American Tobacco reducing prices, which may enhance HILO's market share [2]. - The US market is anticipated to improve further, with an increase in the compliance product listing rate expected from Q3 2025, benefiting Smoore's core supply chain [2]. - In Europe, Smoore's ODM revenue is projected to grow significantly, with a year-on-year increase of 38% in the first half of 2025, indicating a successful transition from disposable products to compliant alternatives [3]. - The HNB (Heated Not Burned) product line is set to launch in Japan and expand into Europe, with expectations for revenue growth in subsequent quarters [3]. - Profit forecasts indicate a continuous improvement in operational performance, with net profits projected to reach 1.23 billion, 2.02 billion, and 3.06 billion yuan for 2025, 2026, and 2027 respectively [3]. Summary by Sections Market Developments - The US FDA and CBP have conducted significant enforcement actions against unauthorized e-cigarette products, indicating a tightening regulatory environment that may benefit compliant products [1]. - The introduction of new regulations in various US states is expected to enhance the market for compliant products, with a notable increase in the market share of compliant flavors [2]. Financial Projections - Total revenue is projected to grow from 11.8 billion yuan in 2024 to 19.3 billion yuan in 2027, with a compound annual growth rate (CAGR) of approximately 18% [6]. - The net profit is expected to recover from a decline in 2024 to a significant increase by 2027, reflecting a turnaround in profitability [6]. - Earnings per share (EPS) are forecasted to rise from 0.21 yuan in 2024 to 0.49 yuan in 2027, indicating improved shareholder value [6]. Operational Insights - The company is focusing on product innovation and compliance, with a shift from disposable products to more sustainable and compliant offerings, which is expected to drive growth in various markets [3]. - The operational cash flow is projected to improve significantly, reflecting better management of working capital and operational efficiency [9].

Investment Rating - The report does not provide a specific investment rating for the company [1] Core Views - The company is expected to achieve a revenue of 60.13 billion yuan in the first half of 2025, representing an 18.3% year-on-year increase. However, the total comprehensive income is projected to be between 4.51 billion and 5.51 billion yuan, indicating a decline of 23.9% to 37.8% year-on-year, with a median estimate of 5.01 billion yuan, which is a 30.8% decrease [1] - The company anticipates maintaining double-digit revenue growth in Q2 2025, although profits are under pressure due to increased share-based payment expenses of 176 million yuan and a rise in sales and management expense ratios [1] - The company is actively responding to market changes, with expectations for stable growth despite regulatory pressures on traditional disposable products. The company is focusing on expanding its compliance product offerings and enhancing its self-owned brand overseas [2] - The HILO product is performing well, with an accelerated expansion in the Japanese market, which is expected to contribute positively to the company's HNB growth [2] - Profit forecasts for the company indicate net profits of 12.1 billion, 20.3 billion, and 30.0 billion yuan for 2025, 2026, and 2027 respectively, with corresponding P/E ratios of 99.4X, 59.3X, and 40.3X [2] Financial Summary - The total revenue for 2024 is projected at 11.799 billion yuan, with a growth rate of 6%. For 2025, the revenue is expected to be 12.011 billion yuan, reflecting a 2% growth. The net profit attributable to the parent company is forecasted to be 1.303 billion yuan in 2024, decreasing to 1.213 billion yuan in 2025, before rising to 2.034 billion yuan in 2026 and 2.995 billion yuan in 2027 [4][6] - The company's operating income is expected to grow from 11.799 billion yuan in 2024 to 17.063 billion yuan in 2027, with a compound annual growth rate of approximately 22.57% [4][6] - The company's cash flow from operating activities is projected to be 1.753 billion yuan in 2024, decreasing to 942 million yuan in 2025, and then increasing to 3.084 billion yuan by 2027 [7]