Core Thesis - British American Tobacco p.l.c. (BTI) is viewed positively due to its strong dividend yield, cash flow generation, and growth in new product categories, making it a reliable investment option [1][3][6] Financial Performance - As of January 13th, BTI's share price was $56.62, with trailing and forward P/E ratios of 29.85 and 11.40 respectively [1] - The company has delivered over 60% total return since the initial investment, indicating strong performance [3] - Operating cash flow conversion is expected to exceed 95%, showcasing the company's ability to generate substantial free cash for dividends, buybacks, and debt reduction [5] Business Segments - The traditional combustibles business in the U.S. is stabilizing, showing revenue and profit growth for the first time since 2022 [4] - New product categories, such as Velo, are experiencing rapid expansion with triple-digit revenue growth and are on track for full-year profitability [4] - The U.S. vaping segment, Vuse, has returned to growth, further supporting revenue recovery [4] Capital Management - Management has increased the share buyback program to £1.3 billion for 2026 and aims to reduce net debt to EBITDA to a target range of 2.0–2.5x, providing flexibility for capital returns to shareholders [5][6] - The company reaffirms mid-term guidance with steady revenue and profit growth, alongside continued dividend progression [6] Investment Outlook - British American Tobacco is positioned to deliver shareholder value through resilient cash generation and diversified growth drivers, while expanding future dividend capacity [7] - The stock has appreciated approximately 35.35% since a previous bullish thesis, driven by new product categories and stabilization in U.S. combustibles [8]

Investment Rating - The investment rating for Smoore International (06969) is maintained as "Buy" [7] Core Views - The report highlights the gradual improvement in electronic cigarette regulations, emphasizing the bottom value of Smoore International as a compliant market leader poised to benefit from the changing supply landscape [2][3] - The report anticipates significant revenue growth for Smoore International, projecting revenues of HK$141.32 billion, HK$163.76 billion, and HK$195.88 billion for 2025, 2026, and 2027 respectively, with year-on-year growth rates of +19.78%, +15.88%, and +19.62% [11] Summary by Sections Regulatory Environment - Recent regulatory developments include a comprehensive crackdown on illegal electronic cigarette activities, with the government emphasizing the need for stricter oversight and compliance in production and sales [2] - The National Tobacco Monopoly Administration has initiated measures to curb excessive competition and prevent overcapacity in the electronic cigarette industry [2] Market Performance - British American Tobacco's Hilo brand is expected to see positive growth, with new product launches in various countries contributing to revenue increases [3] - The report notes a recovery in the vaping segment, with improved sales for the Vuse brand in the U.S. due to enforcement actions against illegal products [4] Financial Highlights - Smoore International executed significant share buybacks totaling approximately HK$1.99 billion, reflecting confidence in its long-term growth prospects [5] - The forecasted net profit for Smoore International is projected to be HK$9.13 billion, HK$18.46 billion, and HK$26.75 billion for 2025, 2026, and 2027, with respective growth rates of -29.94%, +102.23%, and +44.87% [11]

Core Viewpoint - British American Tobacco (BTI) is experiencing a divergence in analyst outlook, with Morgan Stanley maintaining a cautious stance while Jefferies expresses strong confidence in the company's growth potential, particularly in smoke-free products [2][3]. Analyst Ratings and Price Targets - Morgan Stanley analyst Rashad Kawan raised the price target for BTI to 3,050 GBp from 3,000 GBp but retained an Underweight rating on the shares [2]. - Jefferies has named BTI as its top pick in the global tobacco sector, citing a sustainable shift towards a smoke-free product portfolio that is not fully reflected in the current share price [3]. Investment Case Factors - Jefferies analyst Andrei Andon-Ionita highlighted several positive factors for BTI, including market share gains in the US modern oral segment, early signs of volume and pricing improvements, and a solid outlook for combustibles through 2026 [4]. - The company's strong balance sheet is expected to allow for continued and meaningful cash returns to shareholders [4]. Growth in Modern Oral Products - Jefferies is more optimistic than the broader Wall Street consensus regarding BTI's growth in modern oral products, particularly in the US, where Velo Plus has seen over 300% growth in both volume and value [5]. - The resilience of the combustibles business is noted, as it continues to generate robust cash flow and margin expansion despite ongoing volume declines [5].

Core Viewpoint - The report from Guojin Securities indicates a differentiated performance in the light industry manufacturing sector, with home furnishings and paper sectors stabilizing at the bottom, while new tobacco and packaging sectors show a steady upward trend. The trendy toy sector is showing positive signals of recovery, whereas the light consumer goods sector is under pressure [1]. Group 1: Home Furnishings - The central economic work conference continues to focus on "boosting consumption and expanding domestic demand," with upcoming actions to stimulate consumption, benefiting home furnishings demand recovery [2]. - In November, China's furniture export value decreased by 8.83% year-on-year, but the decline has narrowed to single digits. Exports to Southeast Asia are steadily increasing, while exports to the U.S. are showing a mild downward trend [2]. - The report suggests that while domestic demand remains weak in the short term, it is expected to recover steadily due to supportive consumption policies. Companies with strong brand attributes and operational advantages are recommended [2]. Group 2: New Tobacco - In the vaping sector, 18 states in the U.S. have implemented regulations, covering about 50% of the industry's tracked channel sales, which is expected to support sales recovery for compliant brands like Vuse [3]. - The report highlights that as enforcement against illegal vaping products strengthens, the compliant market is likely to expand, benefiting leading brands [3]. - The FDA has approved ON!Plus nicotine pouches, marking a significant regulatory milestone for the nicotine pouch market [3]. Group 3: Paper and Packaging - As of December 18, domestic prices for needle and broadleaf pulp were 5542 and 4633 yuan per ton, respectively, with a slight increase from the previous week. The report notes a continuous decline in inventory levels, indicating tightening supply and rising prices [4]. - The report indicates that downstream packaging demand is steadily recovering, which is expected to support the performance of packaging companies [4]. - The acquisition of Zhongliang Packaging by Aorijin has significantly increased market concentration in the two-piece can industry, enhancing overall pricing power [4]. Group 4: Light Consumer Goods - The light consumer goods sector is experiencing heightened competition, with a clear demand-driven focus and increasing brand concentration. The report highlights top brands in the toothpaste market, indicating a shift towards efficacy and e-commerce adaptability [5]. - Companies with strong new product capabilities and robust offline channel growth logic are recommended for investment [5]. Group 5: Trendy Toys - The trendy toy industry is transitioning from rapid IP growth to a phase of deep cultivation and international expansion. Leading companies like Pop Mart are actively launching new products and expanding their market presence [7]. - The report emphasizes the importance of focusing on leading companies and traditional firms that are successfully transforming their IP development strategies [7]. Group 6: Investment Recommendations - Recommended companies in the home furnishings sector include Oppein Home, Sophia, and Mousse Holdings. In the new tobacco sector, recommended companies include Smoore International and China Tobacco Hong Kong [8]. - For light consumer goods, companies like Pop Mart and Morning Glory are highlighted, while in the paper and packaging sector, Yutong Technology and Sun Paper are recommended [8].

Core Viewpoint - The global e-cigarette industry is entering a new product life cycle and regulatory enforcement period, with major brands actively engaging in market cultivation, leading to accelerated industry expansion. Companies with product technology and supply chain competitiveness are recommended for investment [1]. Regulatory Environment - On December 18, 2025, the State Council issued an opinion on cracking down on illegal tobacco activities, emphasizing strict regulation of e-cigarettes. Key measures include comprehensive strengthening of e-cigarette regulation, severe penalties for illegal production, wholesale, transportation, and sales, as well as enhanced efforts against e-cigarettes containing addictive substances [1]. - The policy aims to combat non-compliant e-cigarette exports from the source, accelerating the clearance of excess industry capacity [1]. Market Impact - The leading compliant manufacturer, Smoore International, is expected to benefit from the tightening of industry regulations. The company's vaping business is anticipated to improve due to changes in the regulatory environment in the U.S. and Europe, with further upward adjustments expected by 2026 [1]. - British American Tobacco forecasts a single-digit decline in its vaping business in the second half of 2025, a significant improvement compared to a 13% decline in the first half of 2025, primarily due to strengthened enforcement at federal and state levels in the U.S. [2]. - Sales of the Vuse brand in states implementing e-cigarette product listings increased by 7% [2]. Export Data - According to Chinese customs, the export value of e-cigarettes to the U.S. from May to July 2025 saw significant year-on-year declines of 39%, 67%, and 14% respectively [2].

Investment Rating - The report assigns an "Overweight" rating for the electronic cigarette industry, indicating a potential increase in value relative to the market index [4]. Core Insights - The electronic cigarette industry is entering a new product life and regulatory enforcement cycle, with major brands actively engaging in market cultivation, leading to accelerated industry expansion [2][4]. - The Chinese government has issued strict regulations to combat illegal activities related to electronic cigarettes, which is expected to expedite the exit of non-compliant production capacity from the market [4]. - The report highlights that leading compliant manufacturers, such as Smoore International, are likely to benefit from the tightening regulations [4]. Summary by Sections Regulatory Environment - The State Council has emphasized comprehensive regulation of electronic cigarettes, including strict measures against illegal production, wholesale, transportation, and sales [4]. - The focus is on international cooperation to tackle non-compliant electronic cigarette exports, which will help clear out the industry [4]. Market Dynamics - Smoore International is expected to see improvements in its aerosol business due to changes in regulatory environments in the US and Europe, with a potential recovery in 2026 [4]. - British American Tobacco anticipates a single-digit decline in its aerosol business in the second half of 2025, a significant improvement compared to a 13% decline in the first half of 2025 [4]. Financial Projections - Smoore International's earnings per share (EPS) are projected to be 0.17 RMB for 2025, increasing to 0.41 RMB by 2027, with a price-to-earnings (PE) ratio decreasing from 67 in 2025 to 28 in 2027 [5]. - British American Tobacco's EPS is forecasted to rise from 2.83 GBP in 2025 to 3.09 GBP in 2027, maintaining a stable PE ratio of 15 [5].

Investment Rating - The report suggests a cautious optimism for the home furnishing sector, with a recommendation to prefer leading companies with clear dividend attributes and retail transformation advantages [4][9]. Core Insights - The home furnishing sector is experiencing weak demand, with a significant decline in property transactions, but government policies aimed at boosting consumption are expected to support gradual recovery [4][9]. - The new tobacco sector shows signs of stabilization and growth, particularly in the vapor segment, supported by regulatory actions against illegal products [10][11]. - The paper and packaging industry is witnessing price increases due to tightening supply and recovering demand, indicating potential for price recovery in finished paper products [11][12]. - The light consumer goods and trendy toys sectors are showing growth, with domestic brands outperforming foreign ones in certain categories [13][14]. Summary by Sections Home Furnishing Sector - Domestic sales are under pressure, with a year-on-year decline of 36.29% in new home transactions and 38.19% in second-hand home transactions as of December 12 [4][9]. - Government initiatives to stimulate consumption are expected to positively impact home furnishing demand recovery [4][9]. - Export data shows a decline of 8.83% in furniture exports from China, while Vietnam's furniture exports increased by 8.59% [4][9]. New Tobacco Sector - The vapor segment is seeing regulatory support, with 18 states in the U.S. implementing vapor product regulations, which is expected to enhance sales for compliant brands like Vuse [10][11]. - The heated tobacco segment is experiencing increased promotional efforts, with expectations for significant growth by 2026 [10][11]. Paper and Packaging Sector - Prices for needle and broadleaf pulp have increased, with current prices at 5502 and 4605 RMB per ton respectively, indicating a tightening supply situation [11][12]. - Packaging materials are also seeing price increases, with boxboard and corrugated paper prices rising by 7.46% and 13.71% respectively since August [12]. Light Consumer Goods and Trendy Toys - The toothpaste segment saw a 13% increase in online sales, while sanitary napkins experienced a modest 1.2% growth [13][24]. - The trendy toy sector is thriving, with online sales growth of 10%, and specific categories like blind box dolls growing by 33% [14][24].

Group 1 - The core viewpoint is that British American Tobacco (BTI.US) is expected to see accelerated growth in its new tobacco business in the second half of 2025, benefiting from a favorable industry environment and product lifecycle expansion [1] - The HNB (Heated Not Burned) segment is showing positive feedback for new products, with a goal for global expansion in 2026, despite a slight decline in market share for the Glo brand in 2025 due to competition [1] - The Glo Hilo product has achieved a 1% market share in Japan and is gaining traction in Poland and Italy, with expectations for stabilization and recovery in market share by 2026 [1] Group 2 - The vaping segment continues to benefit from an improved market environment, with a projected revenue increase in the second half of 2025, following a 13% year-on-year decline in the first half [2] - The Vuse brand has seen a 0.1 percentage point increase in market share, particularly in the U.S. where it rose by 0.7 percentage points, despite some growth being impacted by illegal vaping products in Canada [2] - The new oral tobacco product Velo Plus is expected to drive significant growth in the U.S. market, with a projected increase in market share by 9.2 percentage points to 15.6% and a global market share increase of 5.9 percentage points to 31.8% [2] Group 3 - Traditional cigarette operations remain stable, with a slight decline in market share of 0.1 percentage points, but a positive outlook for the second half of 2025 driven by improved conditions in the U.S. market [3] - The company anticipates a revenue and adjusted operating profit growth of approximately 2% for the fiscal year 2025, with accelerated growth in new tobacco revenue expected to achieve double-digit growth in the second half [3] - The company plans to increase its share buyback program to £1.3 billion in 2026, up from £1.1 billion in 2025 [3]

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]

Investment Rating - The investment rating for the company is "Buy" (maintained) [6] Core Insights - The new tobacco products from British American Tobacco (BAT) contributed significantly to profits in the first half of 2025, with revenues of £1.651 billion, a year-on-year increase of 2.4%, and an adjusted gross profit of £1.006 billion, up 6.8% [1] - BAT expects accelerated growth in its new tobacco business in the second half of 2025, projecting a mid-single-digit revenue growth for the full year [1] - The Glo Hilo product received positive feedback from its trial in Sendai, Japan, and there are plans for further promotion in Europe [2] - The heated tobacco segment saw a slight revenue increase of 0.8% in the first half of 2025, although market share declined due to increased competition [2] - The vaping segment faced challenges, with Vuse sales down 12.9% and revenues down 15.3% due to the proliferation of illegal products [3] - The oral tobacco segment, particularly Velo, experienced significant growth, with sales up 42.2% and revenues up 38.1% in the first half of 2025 [4] - The company is optimistic about the future growth of Glo Hilo and the oral tobacco segment, while the vaping segment may recover due to regulatory actions against illegal products [5] Financial Summary - Projected revenues for the company from 2025 to 2027 are £13.161 billion, £15.590 billion, and £18.633 billion, representing year-on-year growth rates of 11.55%, 18.45%, and 19.52% respectively [5] - Projected net profits for the same period are £1.311 billion, £2.040 billion, and £2.763 billion, with growth rates of 0.57%, 55.68%, and 35.40% respectively [5] - The current market capitalization is approximately HK$131.19 billion [6]