Guotai Haitong: HNB industry scale is expected to accelerate expansion recommended SMORE INTL (06969) and so on.

Guotai Haitong released a research report stating that in the second half of 2025, the new tobacco business of British American Tobacco (BTI.US) will see accelerated growth, and the industry chain is expected to benefit from a high level of prosperity. The global HNB industry is entering a new round of product lifecycle, with major brands actively entering the market for market cultivation, and the industry scale is expected to accelerate expansion. Recommended targets with competitive product technology and supply chain capabilities are SMOORE INTL (06969) and British American Tobacco. The main points of Guotai Haitong are as follows: HNB: New product market feedback is ideal, global expansion to accelerate in 2026 Revenue growth remained stable throughout 2025, affected by competitive activities and resource reallocation. Glo brand's market share in major global markets decreased by 1.2 percentage points, mainly due to competition in Japan, and the company is gradually phasing out traditional equipment lines. The high-end new product Glo Hilo achieved a market share of 1% in Japan (2% in the high-end market), with faster market share growth in Poland and Italy. In 2026, the Glo brand's overall market share is expected to narrow the decline and stabilize and rise, mainly driven by Glo Hilo. Vaping e-cigarettes continue to benefit from market environment optimization, high growth of new oral tobacco products continue Improvement in the US market drove improved performance in 2025 H2 (compared to -13% in 2025 H1). Vuse brand's market value share increased by 0.1 percentage points in major markets, with an increase of 0.7 percentage points in the US. Some market growth was impacted by illegal e-cigarettes in Canada. At the same time, the high-end new product Vuse Ultra performed well in trial markets in Canada, Germany, and France, and is expected to accelerate global expansion in 2026. In terms of new oral tobacco products, Velo Plus drove triple-digit growth in the US region in 2025, pushing the market share in the US region up by 9.2 percentage points to 15.6%, and globally by 5.9 percentage points to 31.8%. In addition, Velo Plus has started to enter the European market, with a promotional strategy similar to the US being expected in the initial stage. In terms of new products, Velo shift has received positive feedback in the Swedish market since September 2025. Traditional cigarettes business is stable, guiding the accelerated growth of new tobacco in the second half of the year, and increasing buyback efforts in 2026 Throughout 2025, the company's cigarette business maintained its market value share in major global markets, with a slight decline in sales share of 0.1 percentage points. In the US region, the market value share increased by 0.2 percentage points, while the sales share remained stable. The improvement in cigarette business in the second half of the year was mainly driven by the US market, benefiting from strengthened commercial activities, DTC business promotion, and overall improvement in the cigarette market environment (increase in employment in the US). In addition, according to the company's announcement, it is expected that revenue and adjusted operating profit for the fiscal year 2025 will increase by approximately 2%, with accelerated growth in new tobacco revenue in the second half of the year, achieving double-digit growth, driving single-digit growth for the full year 2025, and the performance in 2026 is expected to be at the lower end of the growth guidance (revenue growth of 3%-5%, adjusted EPS growth of 5%-8%). The company also announced an increase in share buybacks to 1.3 billion in 2026 (from 1.1 billion in 2025). Risk warning: Enforcement in the US is not as expected, and new product marketing may not meet expectations.