(Huachuang Securities): Maintains "strong buy" rating for SMOORE INTL (06969) with a target price of 21.9 Hong Kong dollars.

Huachuang Securities released a research report stating that it maintains a "strong buy" rating on SMOORE INTL (06969) with a target price of 21.90 Hong Kong dollars. The company is a global leader in electronic atomization, with high technological barriers. In the context of stricter regulations, the electronic cigarette business is expected to continue to enjoy the benefit of increasing market share, while the HNB business is expected to create a second growth curve, with long-term growth potential. Based on the company's performance in the 25Q3 and the progress of HNB promotion, the bank has adjusted its profit forecast, predicting a net profit attributable to the mother of 10.58/20.64/26.21 billion yuan in 25-27 (previously 15.14/20.29/24.55 billion yuan), corresponding to a PE of 76/39/30X. Key points from Huachuang Securities are as follows: Company announces third quarter operating performance In the first three quarters, the company achieved revenue of 10.21 billion yuan, a year-on-year increase of 21.8%; net profit of 8.09 billion yuan, a year-on-year decrease of 23.8%; adjusted net profit of 11.82 billion yuan, a year-on-year increase of 0.1%. In the third quarter alone, the company achieved revenue of 4.97 billion yuan, a year-on-year increase of 27.2%; net profit of 3.17 billion yuan, a year-on-year decrease of 16.4%; adjusted net profit of 4.44 billion yuan, a year-on-year increase of 4.0%. Positive market feedback for HNB products, optimistic about their future growth In 25Q3, the company successfully launched new products that heat without burning in more major markets around the world with strategic customers, and the increase in product shipments drove impressive year-on-year/quarter-on-quarter revenue growth. According to feedback from 2Firsts, compared to IQOS, users generally praise the fashion design, flavor transmission, and odor control of Glo Hilo. Looking ahead, as Glo Hilo gradually expands in the European market, the product penetration rate is expected to accelerate. Atomization business benefits from stricter industry regulations, own brand performance outstanding Major countries around the world are intensifying their regulation of non-compliant products, and according to newsmax, a new poll in the United States found that 80% of voters support stronger enforcement against illegal electronic cigarettes, which may accelerate the company's business recovery. In addition, due to the launch of flagship new products and strengthened localization operations, revenue from the company's own brand business has maintained steady growth. Adjusted net profit margin is temporarily under pressure due to structural impact, expense ratio continues to improve In 25Q3, the company's adjusted net profit margin was approximately 10.6%, a year-on-year decrease of 2.4 percentage points, with the main reason being the impact of product structure (a higher proportion of low-margin smoking products in early sales of HBN). On the expense side, the company's sales/management/research and development expense ratio has steadily improved, and is expected to release profit elasticity in the future.