Core Viewpoint - China Tobacco Hong Kong is positioned as the exclusive operational entity within the China Tobacco system, focusing on international business expansion and capital market operations, with a long-term outlook for integrating quality overseas assets and pursuing external acquisition opportunities [1] Group 1: Business Operations - The Chinese tobacco industry operates under a governance system that generates significant revenue, with an expected total industry tax and profit of 16,008 billion yuan in 2024, accounting for 7% of fiscal revenue [1] - The company has exclusive rights to import and export tobacco leaves, with a pricing model that includes a regular import markup of 6% and export procurement price reductions of 1%-4% [2] - The company operates duty-free shops in Thailand and Singapore, covering over 200 duty-free and taxable retail points, with a pricing strategy that includes markups of 1%-5% [2] Group 2: Financial Performance - The company is projected to achieve a revenue and net profit compound annual growth rate (CAGR) of 10% and 12% respectively from 2016 to 2024, indicating a trend of operational growth [1] - The Brazilian business segment has shown significant growth, with revenue increasing from 315 million HKD in 2021 to 1.05 billion HKD in 2024, reflecting a CAGR of 49.4% [3] Group 3: Strategic Development - The company is expected to benefit from the global trend towards new tobacco products, with ongoing efforts to expand its market presence in Southeast Asia, the Russian region, the Middle East, and Europe [3] - The company has signed procurement agreements with various industrial companies in China, focusing on the sale of heated-not-burn (HNB) products to retailers outside of China [3] - The company aims to align its growth strategy with that of international tobacco giants like Philip Morris International, indicating a broad growth potential [4]

Core Viewpoint - The development of new tobacco products, particularly heated not burned (HNB) tobacco, is an inevitable trend in the industry, with potential for high-quality growth in the domestic tobacco system as it aligns with global trends [1] Group 1: Global Tobacco Market Trends - The global cigarette market is experiencing an irreversible decline, with smoking rates dropping from 30.75% in 2005 to 21.74% in 2022, and cigarette market volume decreasing from 53,908 billion sticks in 2018 to an estimated 51,561 billion sticks in 2024, reflecting a CAGR of -0.74% [2] - Major international tobacco companies are shifting focus to new tobacco products as a core growth driver, with Philip Morris International aiming for over two-thirds of its revenue to come from new tobacco products by 2030, and British American Tobacco targeting 50% by 2035 [2] Group 2: Domestic Tobacco Market Dynamics - The growth of traditional cigarette consumption in China is under pressure, with production increasing from 23,642 billion sticks in 2019 to 24,655 billion sticks in 2024, reflecting a CAGR of 0.84%, while sales grew from 23,631 billion sticks to 24,507 billion sticks, with a CAGR of 0.73% [4] - The inventory levels in the tobacco industry have risen significantly, from 150 billion yuan in 2010 to 439.4 billion yuan in 2024, indicating high stock levels and increasing difficulty in growth [4] Group 3: HNB Tobacco Development and Regulation - The penetration rate of heated tobacco in Japan has rapidly increased since 2019, with market volume growing from 37.28 billion sticks in 2019 to an estimated 64.50 billion sticks in 2024, achieving a CAGR of 11.59% [3] - The regulatory framework for HNB products in major markets like the US, Japan, and Europe is well-defined, providing a potential reference for domestic regulation in China [5] Group 4: Domestic HNB Product Development - Domestic tobacco companies have made significant progress in HNB product development since 2017, with multiple companies launching HNB devices and pods targeting Southeast Asian markets, and over 50 patents in the field of heated tobacco technology [6] - The current product offerings and technological advancements in the HNB sector provide a solid foundation for the development of the domestic HNB industry [6]

Core Viewpoint - The pricing logic of Chinese stocks is subtly changing, with China taking a more proactive role in global trade, and the manufacturing sector entering a globalization development cycle. The real estate market is stabilizing, leading to a shift in economic thinking, while macro tail risks are decreasing. New technologies and industries are emerging, creating more opportunities in structural development areas [1]. Group 1: New Consumption Trends - The pet food industry is experiencing a simultaneous increase in volume and price, driven by diversified growth and strong brand loyalty, suggesting significant potential for leading brands [2]. - The gold and jewelry sector is expected to maintain a favorable outlook through 2026, with a focus on the value retention of gold jewelry and the strengthening of leading brands [2]. - The collectible toy market is evolving towards a global business model, transitioning from a single product focus to an integrated IP and ecosystem approach, highlighting the importance of strong brand positioning [2]. - The new tobacco sector is seeing stricter regulations but a steady recovery in the compliant market, with increased penetration of heated tobacco products (HNB) [2]. - The AI smart glasses market is projected to grow significantly, with sales expected to reach 1.8 million units by 2026, indicating a shift in product development priorities [2]. - The two-wheeler market is undergoing regulatory changes that are optimizing the industry structure, with leading companies expected to benefit from improved product offerings [2]. Group 2: Cyclical Opportunities - The home furnishings sector is anticipated to remain in an adjustment phase until 2026, with growth driven by demand for soft and smart home products [3]. - The paper industry is facing a tightening supply of wood chips, which may support a gradual recovery in pulp prices, with leading companies expected to enhance their competitive advantages [3]. - The metal packaging industry is seeing increased concentration, with expectations of slight price increases in 2026, while the paper and plastic packaging sectors are maintaining stable demand [3]. Group 3: Export Dynamics - Following the US interest rate cuts, expectations for real estate improvement are rising, and corporate orders are showing signs of recovery, with leading companies benefiting from localized production strategies [5]. - Companies with global layouts, such as home furnishings and automotive brands, are demonstrating resilience and expanding their brand influence through mature local operations [5]. Group 4: Textile and Apparel - The outdoor apparel market is projected to grow significantly, with a CAGR of 9.6% for outdoor clothing and 9.2% for footwear from 2025 to 2029, driven by product innovation [6]. - The men's clothing and home textile sectors are showing resilience, with leading companies benefiting from high dividend yields and online sales growth [6]. - The textile manufacturing sector is optimistic about external demand, with healthy channel inventories and improving orders, particularly in Indonesia as a key production destination [6].

Core Viewpoint - Smoore International (06969) has seen a stock increase of over 4%, currently trading at HKD 12.96, with a transaction volume of HKD 146 million. The company has renewed its procurement framework agreement with EVE Energy, effective from January 2026 to December 2028, for battery products, indicating a positive outlook for the electronic vaporization product market [1]. Group 1 - The renewed procurement agreement with EVE Energy is expected to support the continuous growth of Smoore's product orders due to the expanding global electronic vaporization market [1]. - The company is likely to benefit from the entry of major international tobacco players' heated non-combustible (HNB) products into mainstream markets, which may contribute to sales growth in new regions [1]. - In Europe, particularly in the UK, there is potential for a shift towards more profitable pod-based and open-system products, enhancing profitability [1]. Group 2 - The enforcement of electronic cigarette regulations in the United States is expected to restore market share for compliant products, providing significant recovery opportunities [1]. - Smoore's diverse business segments, including vapor electronic cigarettes, HNB, vapor beauty, and vapor medical products, are entering a harvest phase, with global launches and multi-point catalysts anticipated [1].

Core Viewpoint - The report from Guotai Junan indicates that Smoore International (06969) has shown an upward trend in industry prosperity in Q3, leading to an upward revision of profit forecasts for the company, with expected net profits of 1.03 billion, 1.94 billion, and 2.54 billion yuan for 2025-2027, maintaining a "Buy" rating [1] Group 1: Financial Performance - In Q3 2025, the company achieved a record revenue of 4.197 billion yuan, a year-on-year increase of 27.2% and a quarter-on-quarter increase of 27.5% [1] - The net profit attributable to shareholders was 317 million yuan, a year-on-year decrease of 16.4% but a quarter-on-quarter increase of 5.7%; excluding stock incentive expenses, net profit increased by 4.0% year-on-year and 4.8% quarter-on-quarter [1] Group 2: Business Growth - The OEM and proprietary brand revenues both experienced growth on a quarter-on-quarter basis, with significant increases in HNB and vaping businesses [2] - In the HNB segment, the company supported strategic customers in global market expansion, resulting in a substantial increase in product shipments [2] - In the vaping segment, the company assisted more clients in launching new compliant electronic vaping products due to increased regulatory scrutiny in major global markets [2] Group 3: Industry Outlook - The traditional vaping business is expected to benefit from changes in regulatory environments in the US and Europe, with a potential increase in market share under compliant operations [3] - The new Glo Hilo product in the HNB segment has received positive feedback, with the company aiding clients in nationwide product promotion in Japan by September 2025 and plans to expand into more core markets in the second half of 2025 [3] - The company has developed multiple technology platforms to address various user pain points, and collaborative efforts to accelerate commercialization are ongoing, indicating a clear growth path for the business [3]

Investment Rating - The report provides a positive outlook on the home furnishing sector, new tobacco, and packaging industries, while indicating a stable recovery in the paper industry and light consumer goods [3][4][11]. Core Insights - The home furnishing sector shows signs of stabilization in domestic demand, with a year-on-year decrease in transaction area narrowing to -22.46% as of October 17. The external sales are boosted by strong performances on platforms like Amazon, with notable growth in GMV for several companies [4][9]. - In the new tobacco sector, there is a strong push for regulatory enforcement against illegal e-cigarettes in the U.S., which may benefit established brands. The HNB product line is expanding globally, with significant market entry planned in Italy [10][19]. - The paper and packaging industries are experiencing price adjustments due to supply-demand dynamics, with expectations for price increases in corrugated and boxboard paper. The metal packaging sector is also anticipated to see improvements in profitability due to upcoming price hikes [11][12]. Summary by Sections Home Furnishing Sector - Domestic sales are stabilizing, with transaction areas showing a reduced decline. External sales are recovering, particularly in the U.S. market, aided by a favorable exchange rate and potential interest rate cuts [4][9]. - Key companies to watch include 欧派家居, 索菲亚, and 顾家家居, which are expected to have high earnings growth and dividend support [4][9]. New Tobacco - Regulatory support for legal brands is strengthening in the U.S., with 80% of voters favoring stricter enforcement against illegal e-cigarettes. The HNB product line is set to expand in major markets [10][19]. - Recommended companies include 思摩尔国际 and 中烟香港, which are positioned well for growth [10]. Paper and Packaging - Prices for various paper products are expected to rise due to supply constraints and increased demand. The metal packaging sector is also poised for profitability improvements with anticipated price hikes [11][12]. - Key players include 裕同科技 and 太阳纸业, which are expected to perform well in the upcoming quarters [11]. Light Consumer Goods and Trendy Toys - The light consumer goods sector is gearing up for a busy Q4 with the Double Eleven shopping festival, focusing on brand penetration and product innovation [15][16]. - The trendy toy market is seeing strong performance from leading brands, with new product launches and collaborations enhancing market presence [16][18].

Investment Rating - The investment rating for Smoore International (6969.HK) is not explicitly stated in the provided documents, but the report indicates a positive outlook based on revenue growth and market opportunities [1]. Core Insights - Smoore International reported a record high revenue of 10.21 billion yuan for the first three quarters of 2025, representing a year-on-year increase of 21.8%. The total comprehensive income for the period was 785 million yuan, down 25.5% year-on-year. In Q3 alone, revenue reached 4.196 billion yuan, with a quarter-on-quarter increase of 27.5% and a year-on-year increase of 27.2% [1]. - The company is expected to benefit from stringent global regulations, particularly in the vaping sector, with steady growth anticipated in the U.S. and high growth in Europe due to the introduction of compliant products [2]. - The HNB (Heated Not Burned) segment is gradually contributing to revenue growth, with expectations for increased shipments and market expansion in key regions like Poland and Italy [2]. - The adjusted net profit margin for Q3 2025 was approximately 10.6%, down from 13.0% in Q3 2024, primarily due to changes in product mix affecting gross margins. However, the company is optimizing its expense ratios, which are expected to decline as HNB product sales increase [3]. Financial Summary - For the fiscal years 2024 to 2027, the projected total revenue is as follows: - 2024: 11.799 billion yuan - 2025: 14.610 billion yuan - 2026: 17.669 billion yuan - 2027: 21.253 billion yuan - The expected growth rates year-on-year are 6% for 2024, 24% for 2025, 21% for 2026, and 20% for 2027 [4]. - The projected net profit attributable to the parent company is: - 2024: 1.303 billion yuan - 2025: 1.088 billion yuan - 2026: 2.040 billion yuan - 2027: 3.050 billion yuan - The corresponding P/E ratios are projected to be 57.75X for 2024, 83.46X for 2025, 44.52X for 2026, and 29.78X for 2027 [4][6].

Summary of Smoore International's Conference Call Company Overview - **Company**: Smoore International - **Industry**: Vapor Technology and Tobacco Industry Key Financial Performance - **Revenue**: In the first half of 2025, Smoore International reported revenue of 9 billion yuan, a year-on-year increase of 19.5% [2][4] - **Regional Performance**: - European market revenue growth reached 38% due to compliance product sales following a one-time ban [2][4] - Revenue growth in the US and China was 1.5% and -6.1%, respectively [2][4] - **Profit**: The company achieved a profit of 4.92 billion yuan, a decline of 28% year-on-year, primarily due to increased stock incentive amortization, administrative expenses, and marketing costs [2][5] - **Adjusted Net Profit**: Adjusted net profit was 7.37 billion yuan, down 2.1% year-on-year, but actual growth was noted after excluding a 70 million yuan tax impact from OECD's dual pillar international tax [2][5] Future Outlook - **Second Half Expectations**: Smoore International anticipates maintaining double-digit revenue growth in the second half of 2025, with profits expected to remain flat [2][6] - **Key Focus Areas**: - Sales performance of HNB products in Japan in September [2][6] - Progress of British American Tobacco's Halo product launch in Europe, which has the largest marketing budget in its history [2][6] Emerging Business Developments - **Medical Vaporization**: The company is successfully collaborating with major pharmaceutical companies, aiming for FDA approval within the next two to three years [2][7] - **Beauty Vaporization**: The Lancome brand achieved revenue of 31 million yuan in the first half of the year, with expectations of significant profit contributions in the next two years [2][7] Industry Perspective - **Market Position**: Smoore International is viewed as a leader in vapor technology, with a positive outlook on the transformation of the tobacco industry, particularly in the HNB segment [3][8] - **Traditional Business Recovery**: The traditional business is showing signs of recovery, especially in the European market, which has exceeded expectations [2][8] - **Future Profit Contribution**: HNB business is projected to contribute over 1 billion yuan in profit increment next year, while other emerging businesses will take two to three years to reflect in financial statements [2][8]

Investment Rating - The report maintains an "Accumulate" rating for the industry, indicating a positive outlook for future performance [1]. Core Insights - Philip Morris International (PMI) reported Q2 2025 revenue of $10.1 billion, with an organic year-over-year growth of 6.8%. For the first half of 2025, revenue reached $19.4 billion, up 6.5% year-over-year. The revenue from smoke-free products was $4.2 billion, reflecting a 14.5% organic growth and accounting for 41% of total revenue [4][9]. - The Heat-Not-Burn (HNB) segment continues to grow, with Q2 HNB sales reaching 38.8 billion units, a year-over-year increase of 9.2%. Excluding channel inventory effects, the growth rate was 11.4%. As of Q2 2025, the number of HNB users reached 34 million, with Japan's HNB penetration rate increasing to 48% [4][10]. - British American Tobacco (BAT) reported H1 2025 revenue of £12.569 billion, a 1.8% increase year-over-year at constant exchange rates. The revenue from new tobacco products was £1.651 billion, up 2.4%, representing 18.2% of total revenue [4][10]. Summary by Sections Industry Trends - The global tobacco industry is approaching a market size of nearly $1 trillion, with new tobacco products growing at a faster pace and expected to capture more market share. Major players like PMI and BAT are increasing their focus on smoke-free products, particularly HNB [4][12]. Company Performance - PMI's Q2 2025 performance highlights include a 14.5% increase in smoke-free product revenue and a 100% increase in electronic vapor product sales. The company maintains a full-year sales growth forecast of 10-12% for HNB products [4][9]. - BAT's H1 2025 results show a mixed performance in new tobacco products, with HNB revenue growing modestly while electronic vapor products faced challenges due to regulatory issues [4][10]. Investment Recommendations - The report suggests monitoring companies linked to new tobacco products, such as Smoore International, a leading OEM for BAT's HNB products, and Yingqu Technology, the manufacturer for PMI's IQOS [4][12].

Investment Rating - The industry is rated as "Buy" based on the expectation of an increase exceeding 15% in the next 3-6 months [6] Core Insights - The new tobacco industry continues to show strong growth trends, with PMI reporting a revenue increase of 7.1% and adjusted operating profit growth of 16.1% in Q2 2025 [1] - The HNB (Heated Not Burned) market is expected to grow significantly, particularly in the U.S., as the FDA's approval of JUUL products indicates a clear trend towards market expansion [2][3] - The overall HNB global market is on a continuous growth trajectory, with the U.S. market poised to contribute significantly to this growth [4] Summary by Sections Financial Performance - In Q2 2025, PMI achieved revenues of $10.1 billion and adjusted operating profits of $4.3 billion, reflecting year-on-year increases of 7.1% and 16.1% respectively [1] - New tobacco revenue in Q2 2025 reached $4.2 billion, a 15.2% increase year-on-year, with HNB sales volume also increasing by 9.2% to 38.8 billion sticks [1] Regulatory Environment - The FDA has approved JUUL's products for sale in the U.S., increasing the total number of approved vaping products from 34 to 39, indicating a more favorable regulatory environment for compliant products [2] - The FDA's focus on combating illegal products while facilitating the approval of compliant products suggests a dual approach to market regulation [3] Market Outlook - The HNB market in Europe is recovering from flavor bans, with PMI reporting double-digit growth in Q2 2025, indicating resilience in consumer demand [3] - The legal market for HNB products is expected to expand significantly, driven by regulatory changes and increasing consumer acceptance [4]