Sinolink: Maintain a "buy" rating for SMOORE INTL (06969), positive signals from various businesses continue to emerge.

Sinolink released a research report stating that SMOORE INTL (06969), as a core supplier to leading tobacco giants, continues to contribute to performance growth with its self-operated open system products, and is expected to benefit fully from the expansion of the compliant aerosol market in Europe and the U.S. The long-term trend of increasing penetration of new tobacco products overseas is confirmed, and the company's strong technological capabilities and production capacity, deeply integrated with major tobacco groups, highlight its advantageous position to benefit from the industry's overall development trends. The upward trend in the company's aerosol and HNB (heat-not-burn) businesses remains unchanged, with positive signals emerging in various aspects. It is recommended to actively monitor and maintain a "buy" rating. Sinolink's main points are as follows: Event Commentary On December 11th, the company announced that, in order to advance its equity incentive plan, it purchased 8.14 million shares on December 11th at an average price of HK$12.26 per share, with a total expenditure of HK$99.77 million. This large daily repurchase demonstrates the company's confidence in future development. Hilo's product strength is gradually being validated, and British American Tobacco is continuing to increase its promotional efforts According to BAT's 2025 performance forecast, BAT is actively promoting its marketing activities for Wuxi Online Offline Communication Information Technology Co., Ltd. in the Japanese market. The product brand and performance have resonated strongly with consumers, with a retention rate of around 50% from traditional cigarette and heated tobacco consumers. This high retention rate directly validates Hilo's excellent product strength, laying a solid foundation for future cartridge sales. According to BAT's official website, Hilo has recently significantly increased its promotional efforts in the Polish market, selling Hilo devices with two cartridges for only 1 zloty, and Hilo Plus devices with two cartridges for only 79 zloty. Leveraging BAT's extensive sales network and sufficient marketing resources, future sales of Hilo cartridges are expected to continue to increase, contributing core profit growth to SMOORE. Core aerosol business continues to recover, expected to benefit from the expanding European and American markets Since 2024, U.S. regulatory authorities have continued to intensify their crackdown on illegal electronic cigarettes, squeezing the survival space for illegal products. Additionally, the FDA has cautiously supported expanding the range of flavored tobacco products, with compliance markets expected to continue expanding. Countries like England and France have already fully banned disposable cigarettes, and the European market is transitioning from disposable to cartridge-based, pod-based, and open system products. In the second half of 2025, BAT's revenue in the U.S. market has rebounded, with a global market share increase of +0.1 percentage points compared to the end of 2024, including a +0.7 percentage point increase in the U.S. market. BAT expects that the U.S. market will not drag down the overall revenue growth of its new tobacco businesses in 2026, as the aerosol business is undergoing continued recovery. Looking ahead, in the context of increasing competition in the heated tobacco industry with products like IQOS and glo, BAT has clearly stated its intention to accelerate the global expansion pace of Hilo in 2026 to continue to capture market share from the high-end to mid-to-low-end segments. Profit Forecast: The bank predicts that the company's EPS for 2025-2027 will be 0.22/0.37/0.59 yuan, with corresponding PE ratios of 53/31/20 times. Risk Warning: Lower-than-expected overseas regulatory efforts against illegal products; stagnant new product expansion; significant currency fluctuations.