Investment Rating - The investment rating for the industry is "Positive" and is maintained [9] Core Insights - British American Tobacco (BAT) reported a revenue of £12.069 billion for H1 2025, a year-on-year decrease of 2.2% (an increase of 1.8% at constant exchange rates) [2][6] - Revenue from combustible tobacco decreased by 3.5% to £9.515 billion (an increase of 0.8% at constant exchange rates), with total cigarette sales down by 8.7% to 229 billion sticks [2][6] - Revenue from new tobacco products remained flat at £1.651 billion (an increase of 2.4% at constant exchange rates), accounting for 13.7% of total revenue, an increase of 0.3 percentage points year-on-year [2][6] - The company expects a revenue growth of 1%-2% for 2025 (closer to the upper limit) and mid-single-digit growth for new tobacco products, with a projected revenue growth of 3%-5% for 2026 [2][6] Summary by Sections Combustible Tobacco - Revenue decreased by 3.5% to £9.515 billion, driven by price increases, while total cigarette sales fell by 8.7% to 229 billion sticks [2][6] New Tobacco Products - Revenue remained flat at £1.651 billion, with a 2.4% increase at constant exchange rates. The modern oral tobacco segment showed strong growth, while heated tobacco products (HNB) performed steadily, and vaping products faced pressure from illegal markets [2][6] Future Outlook - The company anticipates a revenue increase of 1%-2% for 2025 and mid-single-digit growth for new tobacco products, with expectations of 3%-5% growth in 2026 [2][6] Product Performance - Vaping products saw a revenue decline of 15.3% due to illegal market impacts, while heated tobacco products showed a 0.8% revenue increase. Modern oral tobacco revenue surged by 38.1% [12]

Financial Data and Key Metrics Changes - Group revenue increased by 1.8%, adjusted gross profit rose by 3%, and adjusted profit from operations grew by 1.9%, with adjusted diluted EPS increasing by 1.7% [10][24][47] - The company anticipates full-year revenue at the top end of the 1% to 2% guidance, maintaining APFO guidance of 1.5% to 2.5% [10][26] Business Line Data and Key Metrics Changes - Smokeless products now account for 18.2% of Group revenue, up 70 basis points from last year, with 1.4 million new smokeless consumers added [4] - New categories revenue increased by 2.4%, driven by modern oral growth of over 40% and heated products rising by more than 3%, while vapor declined by 13% [11][12] - Combustibles revenue increased by 0.8%, with volume decline offset by strong pricing, leading to a gross profit increase of 2.4% [13][14] Market Data and Key Metrics Changes - In the U.S., revenue grew by 3.7%, with combustibles driving the growth, while modern oral revenue increased by 3.9% [16][17] - The AME region saw revenue rise by 3.5%, with combustibles up nearly 3% due to strong volumes in Brazil and Turkey [17] - APMEA experienced a total revenue decline of 4.8%, with combustibles down 7.9%, impacted by regulatory headwinds in Bangladesh and Australia [19][20] Company Strategy and Development Direction - The company is focused on a multi-category strategy to leverage consumer trends towards new categories, with significant investments in modern oral and heated products [28][30] - The introduction of the "Fit to Win" program aims to simplify operations and enhance digital decision-making, targeting £500 million in annualized savings by 2028 [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to revenue and profit growth in the U.S., highlighting the importance of regulatory affairs and enforcement for smokeless alternatives [6][41] - The company remains optimistic about the long-term growth potential of modern oral products, especially in emerging markets [30][31] Other Important Information - The company has increased its 2025 share buyback program by £200 million to £1.1 billion, reflecting strong cash generation and commitment to shareholder returns [4][25] - The company has delivered nearly £900 million in productivity savings since 2023 and aims to exceed £1.2 billion by year-end [21] Q&A Session Summary Question: Can you discuss the early performance of GloHilo in Japan and its rollout plans? - Management reported positive feedback from Japanese consumers, with a tailored product offering leading to early market share gains. The rollout will focus on high-profit pools through the end of the year [52][54] Question: What is the current momentum for VeloPlus in the U.S.? - VeloPlus is maintaining strong momentum with high retention rates and increasing market share, despite competitive pressures [57][58] Question: Can you clarify the Fit to Win program's costs and savings? - The program will have some costs in 2025, with a target of £500 million in annualized savings by 2028, which will be reinvested into growth initiatives [61][62] Question: What is the outlook for the vape business in the AME region? - The vape business is facing challenges in Canada due to regulations, but there is potential for growth as the market transitions to closed systems [66][70] Question: How is the company addressing the illegal vapor market in the U.S.? - Management noted a 40% reduction in illegal vapor shipments, with ongoing efforts to enforce regulations and improve market conditions [74][76] Question: What is the impact of the duty drawback on U.S. business? - The duty drawback is positively impacting the top line, but the company is also seeing growth from improved market share and pricing strategies [97][100] Question: Is there capacity to meet the expected growth in VeloPlus? - The company is well-equipped to handle the growth in VeloPlus, with no anticipated capacity shortages [102]

Building a smokeless world Interim Results 2025 Tadeu Marroco – Chief Executive | Soraya Benchikh – Chief Financial Officer Important Information The information contained in this presentation in relation to British American Tobacco p.l.c. ("BAT") and its subsidiaries has been prepared solely for use at this presentation. The presentation is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any jurisdiction where such distribution, p ...

Core Insights - Altria Group, Inc. is committed to transitioning towards a smoke-free future, with a focus on its oral tobacco portfolio, particularly the on! nicotine pouch brand, which has shown significant growth in shipment volumes and market share [1][2][9] - The company's oral tobacco revenues increased by 0.5% to $654 million in Q1 2025, driven by pricing power despite macroeconomic challenges [2] - Altria faces challenges in the vapor segment, particularly after regulatory issues led to the discontinuation of its NJOY ACE product, but plans to introduce compliant alternatives [3][4] Oral Tobacco Performance - The on! nicotine pouch brand's shipment volumes rose 18% year-over-year, exceeding 39 million cans, and its market share in the oral tobacco category increased by 1.8 percentage points to 8.8% [1][9] - The nicotine pouch market share for on! reached 17.9%, indicating strong consumer loyalty and brand strength despite retail price increases [1] Vapor Segment Challenges - Regulatory setbacks have impacted Altria's vapor products, leading to the discontinuation of NJOY ACE, but the company is working on launching new compliant products to regain market share [3][4] Competitive Landscape - Altria competes with Philip Morris International and British American Tobacco in the smoke-free category, both of which are also focusing on reduced-risk products [5][6][7] - Philip Morris reported a 20.4% increase in net revenues and a 33.1% rise in smoke-free gross profit, with significant growth in its ZYN and VEEV products [6] - British American Tobacco aims for 50 million consumers by 2030 and reported a 2.5% increase in New Category revenues in 2024 [7] Financial Performance and Valuation - Altria's stock has gained 12.5% year-to-date, while the industry has grown by 37.7% [8] - The company trades at a forward price-to-earnings ratio of 10.76X, below the industry average of 15.36X [11] - Earnings estimates for 2025 and 2026 suggest year-over-year growth of 4.9% and 3.3%, respectively, with recent upward revisions [12]

Core Insights - Altria Group, Inc. is facing significant challenges as it transitions towards smoke-free alternatives, primarily due to the rise of illicit flavored disposable e-vapor products that are reshaping the U.S. nicotine market [1][3]. Company Performance - In Q1 2025, Altria reported that the adult e-vapor user base in the U.S. has exceeded 20 million, with a year-over-year increase of over 2.6 million users, largely driven by disposable e-vapor products which gained nearly 4 million new users, reaching around 14 million [2]. - Altria estimates that over 60% of the expanding e-vapor market is now dominated by unauthorized, non-compliant products, which poses a significant challenge to its smoke-free revenue growth [2][10]. Market Dynamics - The surge in illicit e-vapor products is a major obstacle for Altria's smoke-free revenue growth, dampening its progress despite an increasing market presence [3]. - The company is collaborating with regulators to address enforcement gaps, but the ongoing availability of illicit products remains a significant barrier [4]. Competitive Landscape - Major tobacco companies like Philip Morris International and British American Tobacco are also accelerating their transition towards smoke-free alternatives, investing in reduced-risk products to adapt to changing consumer preferences and regulatory landscapes [6]. - Philip Morris reported that smoke-free offerings contributed 44% of its gross profit in Q1 2025, with a 20.4% rise in net revenues and a 33.1% increase in smoke-free gross profit [7]. - British American Tobacco aims to reach 50 million consumers by 2030, with its smokeless user base reaching 29.1 million in 2024 [8]. Financial Metrics - Altria's shares have gained 14.4% year-to-date, compared to the industry's growth of 40.8% [9]. - The company trades at a forward price-to-earnings ratio of 10.96X, below the industry average of 15.74X, with a forecasted EPS growth of 5.3% for 2025 [10][12]. - The Zacks Consensus Estimate for Altria's 2025 earnings implies a year-over-year growth of 5.3%, while the 2026 earnings estimate suggests an increase of almost 3% [13].

Core Insights - Philip Morris International Inc. (PM) is accelerating its transition from traditional tobacco to reduced-risk products, with smoke-free products accounting for 44% of total gross profit in Q1 2025, indicating significant progress towards becoming substantially smoke-free [1][8] Group 1: Product Performance - IQOS, PM's heat-not-burn device, achieved 9.4% growth in HTU-adjusted IMS, driven by strong performances in Japan and Europe [2] - ZYN, the oral nicotine pouch acquired from Swedish Match, saw shipments increase by 53% year-over-year to 202 million cans, with PM raising its 2025 shipment forecast to 800-840 million cans [2][8] Group 2: Financial Metrics - Smoke-free organic revenues increased by 20.4%, while gross profit rose by 33.1%, resulting in a gross margin exceeding 70%, significantly higher than combustible products [3][8] - PM's shares have increased by 52.3% year-to-date, outperforming the industry growth of 37% [7] Group 3: Competitive Landscape - Altria is expanding its smoke-free portfolio, with on! nicotine pouch shipments rising 18% year-over-year, contributing to $654 million in net revenues for its Oral Tobacco segment [5] - British American Tobacco aims for 50 million users of smoke-free products by 2030 and plans to derive 50% of revenues from this segment by 2035, with its New Category segment growing by 2.5% in 2024 [6] Group 4: Future Outlook - PM is well-positioned for future growth with strategic manufacturing investments in the U.S. and a multi-category strategy that includes e-vapor products [4] - The Zacks Consensus Estimate for PM's 2025 earnings suggests a year-over-year growth of 13.7%, with 2026 earnings expected to increase by 11.7% [12]

Investment Rating - The industry investment rating is "Overweight (Maintain)" [1] Core Insights - The report highlights the potential growth in the HNB (Heated Not Burned) market, particularly with the launch of Glo Hilo in Japan, which is expected to enhance sales performance and accelerate market penetration [4][5] - The report indicates that British American Tobacco's (BAT) revenue for the first half of 2025 is projected to grow by 1%-2%, driven by strong performance in the U.S. market despite an overall decline in industry retail sales [5] - The report emphasizes the importance of technological barriers in the HNB product segment, particularly in heating technology and flavoring processes, which are crucial for enhancing user experience [4] Industry Performance Over the Last Twelve Months - The industry has shown a relative return of 4.33% over the past month, 4.58% over the past three months, and 5.82% over the past twelve months compared to the CSI 300 index [2] - Absolute returns for the same periods are 4.83%, 2.59%, and 13.97% respectively [2] Related Research Reports - Previous reports include insights on the light industry manufacturing sector and the anticipated release of new products in the smart glasses market [3] - The report also references the performance outlook for British American Tobacco in the first half of 2025, focusing on new product launches and market strategies [5]

Investment Rating - The report maintains an "Outperform" rating for the light industry manufacturing sector [5][9]. Core Insights - British American Tobacco (BAT) reported H1 2025 revenue slightly exceeding guidance, with expectations for accelerated growth in H2 driven by new products [2][18]. - Glo Hilo officially launched in Japan on June 9, 2025, with a focus on consumer feedback in a mature heat-not-burn (HNB) market [2][20]. - Bricks and mortar toy company Blokko has been included in the Hong Kong Stock Connect, with a strategy focusing on global expansion and diverse product offerings [3][35]. Summary by Sections 1. Core Insights and Investment Recommendations - The report highlights a recovery in the home furnishing sector due to government subsidies, recommending companies like Oppein Home and Sophia for their strategic advancements [15][16]. - In the paper and packaging sector, the report suggests focusing on Sun Paper for growth driven by new capacity and Yutong Technology for its stable fundamentals and high dividends [15][16]. 2. Recent Research Tracking and Investment Thoughts - BAT's H1 revenue slightly exceeded guidance, with H2 expected to accelerate due to new product launches [2][18]. - Glo Hilo's launch in Japan is anticipated to benefit from positive consumer feedback, with Smoker as a key supplier [2][20]. - Blokko's global strategy is progressing, with a focus on diverse IP products and community engagement through BFC events [3][35]. 3. Market Review - The light industry sector saw a 2.18% increase last week, outperforming the broader market [37]. - The furniture retail sector reported a 26.9% year-on-year increase in April, while building materials saw a decline of 2.5% [42][49]. 4. Key Data Tracking - In April, furniture retail sales reached 15.3 billion yuan, with a cumulative year-on-year increase of 20.2% [42]. - The paper sector experienced mixed price movements, with domestic prices for certain grades remaining stable while others saw slight fluctuations [49][58]. - The real estate market showed a 3.3% decline in transaction volume for new homes in major cities [64][69]. 5. Company Announcements and Industry Dynamics - Morning Glory announced a change in financial leadership and plans for share buybacks [83]. - The report notes ongoing developments in the entertainment sector, with a focus on companies like Morning Glory for their growth in new business areas [16].

Investment Rating - Industry rating is maintained at "Outperform" [6] Core Insights - British American Tobacco focuses on expanding the Glo product line in the second half of the year, with expectations for revenue growth driven by innovative products [1] - For the fiscal year 2025, British American Tobacco anticipates revenue growth of 1-2% and adjusted operating profit growth of 1.5%-2.5%, indicating strong resilience [1] - The U.S. market is expected to recover revenue and profit growth due to enhanced delivery capabilities of combustible tobacco products and the Velo Plus brand [1] - Despite a 9% year-on-year decline in industry sales, British American Tobacco has solidified its market share in the U.S. [1] - The electronic cigarette export value from China remained stable in April 2025, with a total export value of $8.77 billion, showing a year-on-year decline of 1.84% [4] Summary by Sections Emerging Tobacco Products - Velo is the fastest-growing product in the oral tobacco category, with a market share increase of 270 basis points to 14.3% and a modern oral tobacco share increase of 350 basis points to 29.7% [2] - The U.S. market saw a total volume share increase of 550 basis points to 11.9%, driven by high trial and retention rates [2] - Glo's market share decreased by 90 basis points due to intense competition in Japan, but the launch of Glo Hilo in Serbia showed promising results [2] E-Cigarettes - Vuse maintains its global value share leadership, but the U.S. and Canadian markets are affected by illegal products [3] - The company expects a double-digit revenue decline in the first half of the year, with improvements anticipated in the second half due to the phased launch of the Vuse Ultra product [3] - Long-term goals include revenue growth of 3-5% and adjusted operating profit growth of 4-6% by 2026 [3] Market Performance - The top five export destinations for Chinese e-cigarettes accounted for 65.96% of total exports, with the U.S. being the largest market at $3.34 billion [4] - The UAE market has shown significant growth, surpassing Malaysia to become the fifth-largest destination for Chinese e-cigarette exports [4] Investment Opportunities - Suggested companies to focus on include Smoore International, Yinghe Technology, and others in the vaping supply chain [5]

Investment Rating - The industry investment rating is "Hold" [1] Core Insights - British American Tobacco (BAT) forecasts a revenue growth of 1-2% for H1 2025, with adjusted operating profit expected to increase by 1.5%-2.5% [3][18] - The Glo Hilo product has shown positive market response, with a significant increase in conversion rates in Serbia and expected revenue acceleration in the second half of the year [3][19] - The heated tobacco market is projected to reach approximately $34.463 billion in 2023, with a year-on-year growth of 12.22% [3][23] Summary by Sections Weekly Topic - BAT's H1 2025 performance forecast indicates a slight decline in market share in key markets, but a recovery in the US market with a 10 basis point increase in sales volume and revenue share [3][18] - The Velo product line has seen a market share increase to 29.7%, with double-digit revenue growth, while the Glo Hilo's innovative launch is expected to boost performance in the latter half of the year [3][18] Weekly Market Review - From June 2 to June 6, 2025, the Shanghai Composite Index rose by 1.13%, with the light industry manufacturing sector increasing by 2.18%, ranking 8th among 31 sectors [4][28] - The textile and apparel sector saw a 1.89% increase, ranking 11th among the same sectors [4][28] Key Data Tracking Home Furnishing - In the week of May 25 to June 1, 2025, the transaction area of commercial housing in 30 major cities was 2.1262 million square meters, a 3.25% increase month-on-month [7][36] - The sales area of commercial housing for the first four months of 2025 was 28.3 million square meters, a year-on-year decrease of 2.8% [7][36] Packaging and Paper - As of June 6, 2025, the prices for various paper products showed slight fluctuations, with needle pulp priced at 5977.5 yuan/ton, a decrease of 0.43% [8][48] - The price of waste paper products remained stable, with waste yellow board paper priced at 1478 yuan/ton [8][48] Textile and Apparel - As of June 6, 2025, the cotton price index in China was 14561 yuan/ton, showing a slight decrease of 0.12% [10][10] - In April 2025, the retail sales of clothing and textiles reached 108.8 billion yuan, a year-on-year increase of 2.2% [10][10]