Yamato: Raised SMOORE INTL (06969) target price to 17 Hong Kong dollars, expecting the heating tobacco business to start improving.

The Daiwa report stated that SMOORE INTL (06969) third-quarter total revenue increased by 27% year-on-year to 4.2 billion yuan, reaching a historic high and the largest increase since 2021. The bank has lowered its earnings per share forecast for SMOORE INTL for 2025-2027 by 6% to 20%, expecting a slow recovery in profit margins; it reiterated its "outperform" rating with a target price raised slightly from 16 Hong Kong dollars to 17 Hong Kong dollars. Management for the first time provided guidance, estimating that the heated tobacco (HNB) business will contribute at least 1.2 billion yuan in revenue for the full year, which the bank estimates to be equivalent to about 8% of sales. The report mentioned that although SMOORE INTL's third-quarter revenue exceeded market expectations by at least 10%, the degree to which profits outperformed market expectations was smaller. The key positive factor is the turnaround in the heated tobacco business, with growth momentum coming not only from the single customer British American Tobacco. Although profit visibility remains limited, the trend of improvement in the group's core business should help stabilize its stock price.