2021年以来公司EPS持续下降主因中国相关监管政策密集出台以及海外非法产品冲击，收入端增长承压，并且产品结构变动拖累毛利率，与此同时公司加大研发投入培育新业务，进一步影响盈利能力。在此背景下，市场对于公司后续成长存在担忧，也使得此前PE中枢下行。而公司目前核心优势依然明显，为后续业绩反转奠定基础，一方面依托于持续研发投入，保持核心产品技术领先优势，与大客户深度绑定，另一方面公司多款代工产品已通过美国PMTA审核，客户粘性进一步提升。Guojin Securities released a research report stating that maintaining the “buy” rating of Smore International (06969) and not fully considering the HNB business contribution, the company's 24-26 EPS is expected to be 0.22/0.26/0.37 yuan, respectively. Considering the strong growth of the company's new business in the future, a reasonable PE48x was given for 25 years, and the corresponding target price was HK$13.35.
Guojin Securities's main views are as follows:
In the replay, why did Smore experience Davis' double kill before:
Since 2021, the company's EPS has continued to decline mainly due to the intensive introduction of relevant Chinese regulatory policies and the impact of illegal overseas products. Revenue side growth is under pressure, and changes in product structure have dragged down gross profit margins. At the same time, the company has increased R&D investment to cultivate new businesses, further affecting profitability. In this context, the market is concerned about the company's subsequent growth, which also caused the PE center to decline previously. However, at present, the company's core advantages are still obvious, laying the foundation for subsequent performance reversals. On the one hand, it relies on continuous investment in R&D to maintain technological leadership in core products and is deeply tied to major customers. On the other hand, many of the company's OEM products have passed the US PMTA review, further improving customer stickiness.
The European and American policy headwind period may come to an end, and the company's vaping exchange+open e-cigarette business is expected to benefit significantly.
On the US side, according to Euromonitor statistics, the market share of illegal products currently exceeds 70%. Since this year, on the one hand, the US has clearly stepped up its crackdown on illegal products, on the other hand, expectations for easing taste restrictions are rising. According to estimates, the mid-term market size of legal recombustible products in the US is expected to increase by 63%-299% compared to 23. On the European side, through sorting, it can be found that countries are gradually clarifying the timing of the ban on disposable cigarettes, and the share of cigarette exchanges and open products is expected to rise again in the future. According to estimates, the mid-term market size of exchangeable products in Europe may increase by 42%-60% compared to '23, and the mid-term market for open products may increase by 52%-75% compared to '23. Under this trend, the company's revenue side in the US and European markets will not only benefit from market size expansion, but also rely on changes in revenue structure, and profit margin levels are expected to rise marginally.
With the launch of a new product from HNB, a major customer, the company is expected to usher in a second growth curve.
HNB is still in the dividend period of increasing its global penetration rate. The HNB global market size reached 34.1 billion US dollars in '23, the CAGR reached 23.1% in 18-23, and there is relatively little policy uncertainty. The company has been laying out the HNB circuit for many years and has rich technical reserves. The company's major customer British American Tobacco recently launched HNB's breakthrough new product Glo in Serbia
Hilo's product strength has improved significantly, and will be further promoted in the core market in 2025. Furthermore, as its core supplier of new types of tobacco, the company is expected to benefit from the rapid growth of British and American tobacco in the HNB field in the future.
Based on the advantages of atomization platforms, the new business is expected to open up new space for long-term growth.
In recent years, while ensuring the leading edge in vaping e-cigarette technology, the company has continued to increase investment in research and development directions such as special, medical and cosmetic atomization. Relying on its own atomization platform advantages, the company continues to iterate products in the field of special and cosmetic atomization, and has prepared more differentiated leading technologies in the field of medical atomization. Overall, the company's new product categories are being promoted by platform-based advantages, and product iteration is smooth, and it is expected that they will be gradually expanded in the future to support the company's long-term growth.
