Sinolink: Maintains a "buy" rating on SMOORE INTL (06969), expecting HNB to accelerate its sales volume.

Sinolink released a research report stating that it maintains a "buy" rating for SMOORE INTL (06969), with estimated EPS for 2025-2027 of 0.22/0.39/0.59 yuan respectively. The current stock price corresponds to PE ratios of 67/37/25 times. On October 12, the company released a financial update for 2025Q3. For 2025Q1-Q3, the company achieved revenue of 10.21 billion yuan, a year-on-year increase of 21.8%, and achieved net profit/adjusted net profit (excluding the impact of stock incentive expenses) of 809 million/1.182 billion yuan, a year-on-year decrease of 23.8%/+0.1%. In particular, in 25Q3, the company achieved revenue of 4.197 billion yuan, a year-on-year increase of 27.2%, and achieved net profit/adjusted net profit of 317 million/444 million yuan, a year-on-year decrease of 16.4%/+4.0%. Sinolink's main points are as follows: HNB business is expected to contribute significantly to revenue, and the atomization business continues to improve. With the listing of HNB product hilo contributing to revenue growth and the increasing regulatory efforts against illegal products in the European and American markets, the company's HNB and atomization business have achieved superior growth in revenue both sequentially and year-on-year. In terms of business segments: 1) HNB business, since September, hilo has gradually been fully listed in Japan and Poland, and with its excellent product strength, overall sales are superior, and it is expected that in 25Q3, the company's HNB business will contribute significantly to revenue growth. 2) Atomized e-cigarette business, it is expected that the overall revenue of this business in 25Q3 will achieve double-digit growth. On the ODM side, it is expected that in the third quarter, with full cessation of disposable cigarettes in the UK and France, the European market will benefit from compliance and category switching, and is expected to perform well. The crackdown on illegal products in the overall US market is also gradually strengthening, and since Q3, the FDA has taken action against several major cases of illegal e-cigarettes, and it is expected that the business in the US market will steadily benefit. As for OBM, the company continues to promote the iterative update of its own brand series and channel expansion, steadily increasing market share for its own brand, and it is expected that the APV business will also achieve ideal growth. 3) Special atomization business, relying on the company's gradual operational adjustments to this business, it is expected to achieve relatively stable development in 25Q3. Adjusted net profits have resumed growth, and future profit elasticity can be expected. In 25Q3, the company's adjusted net profit increased by 4.0% year-on-year to 444 million yuan, with an adjusted net profit margin of 10.6%, a decrease of 1.0% from 11.5% in 24Q3. Although the profit margin has decreased year-on-year, there is no need to worry, as the overall performance is still superior, and future profit elasticity is worth looking forward to. The main reasons are: 1) In the early stages of the development of the HNB business, sales of low-margin smoking utensils were the main focus, and it is expected that with the gradual increase in repeat purchases of cigarette cartridges and the manifestation of economies of scale, the profitability of the HNB business will significantly increase. 2) It is expected that the company's R&D investment in the medical atomization field and other areas will continue to increase. Recently, the company's subsidiary's abbreviated new drug application has been accepted by the FDA, indicating progress in the medical atomization business, with the potential for substantial contributions in the future. Expansion of the European and American atomization market & accelerated contribution of HNB to performance growth, long-term growth logic is gradually being realized, seizing the opportunity to layout. Looking ahead, the expansion of the legal atomization market in Europe and America is a trend, and the HNB product glo hilo is gradually starting promotions in the Polish market, with global sales expected to increase as the outstanding product strength is combined with marketing efforts. The growth potential for the HNB business is promising. Overall, continuing the previous views, the company, as the only listed enterprise deeply involved in the overseas supply chains of two major categories of atomization and HNB for tobacco giants, has a certain growth certainty in the future. Risk warning Expectations of low overseas regulatory efforts against illegal products; poor expansion of new products; significantly volatile exchange rates.