Soochow: A New Tobacco Model Reshapes Giant Growth Opportunities for HNB Industry in China

Soochow has released a research report stating that the progress of new tobacco layouts by leading international tobacco companies has become a core variable determining the differences in medium to long-term growth. The pace of the big tobacco companies' transition to smoke-free products is diverging, with PMI leading and BAT and JT catching up. The global tobacco industry is nearing one trillion dollars in scale, with overseas leaders continuously shifting to new tobacco products. The HNB market in China is expected to gradually open up, and attention should be paid to companies benefiting from the development of the global new tobacco industry chain. Soochow's main points are as follows: Global Tobacco: Traditional tobacco compensates for volume with price, while new tobacco reshapes industry growth. By 2025, global tobacco sales are expected to reach $952.9 billion, a year-on-year increase of 3.6%. Traditional tobacco sales are entering a downward path, with leading companies maintaining revenue through price increases and product upgrades; new tobacco sales will reach $90.4 billion, growing 14.4% year-on-year. Among these, HNB/ e-cigarettes/ nicotine pouch sales are projected to reach $43 billion / $24.4 billion / $9.2 billion, representing increases of 9.1% / 4.0% / 42.4% year-on-year, with HNB being the main category in the shift to smoke-free, and nicotine pouches growing the fastest. The progress of new tobacco layouts by leading international companies is becoming a key variable in determining medium to long-term growth differences. Diverging pace of smoke-free transformation among tobacco giants, with PMI leading while BAT and JT speed up. Philip Morris International: Dual-driven by IQOS+ZYN, smoke-free business releases profits. The company's transformation to new tobacco is driven by the HNB brand IQOS and nicotine pouch brand ZYN, with expected smoke-free product revenue of $16.9 billion by 2025, accounting for 41.6% of total revenue, and a CAGR of 20% from 2020 to 2025; the gross margin for smoke-free products is 69.2%, higher than 65.5% for combustible tobacco. The company expects a revenue CAGR of 6%-8% and EPS growth of 9%-11% from 2026 to 2028. British American Tobacco: Full matrix of new tobacco, strong growth in oral tobacco. By 2025, the company expects new tobacco revenue to reach 3.6 billion, accounting for 14.1% of total revenue; revenues from e-cigarettes / heated products / modern oral tobacco are expected to be 1.542 billion / 914 million / 1.165 billion, with changes of -10% / -1% / +47% year-on-year. Oral tobacco brand Velo has become the largest growth engine, while the HNB brand glo is under pressure. The adjusted operating profit for the new tobacco segment in 2025 is projected to be 442 million, with an adjusted operating profit margin rising to 12.0%, further increasing to 13% in H1 2026. In the first half of 2026, revenue from modern oral tobacco is projected to be 780 million, a year-on-year increase of 65.9%. Japan Tobacco: Notable resilience in traditional business, Ploom accelerates catch-up. The company expects revenue of JPY 34.677 trillion by 2025, a year-on-year increase of 10.1%; revenue from reduced-risk products is expected to reach JPY 122.5 billion, growing 23.9% year-on-year, with sales increasing 28.4% year-on-year. The HNB brand Ploom is central to the transition to smoke-free, with global HTS market share increasing from 7.7% in 2021 to 18.1% in H1 2026, with Japan remaining its core market. Altria: Leading profit margins in traditional business, modern oral on! drives transformation. The company focuses on the U.S. market, where traditional tobacco flagship brand Marlboro sustains revenue and profit through volume reduction and price increases. In new tobacco, the on! brand drives growth, with projected revenue from oral tobacco products of $2.789 billion by 2025, a year-on-year increase of 0.5%; total product shipment is projected to be 732.4 million cans, down 5.5% year-on-year, including nicotine pouch on! sales of 177.8 million cans, a year-on-year increase of 10.9%. Shipments of nicotine pouches on! in Q1/Q2 2026 are expected to change by +17.6% / -4.2% year-on-year, with on! becoming the third largest brand in the U.S. nicotine pouch market. Imperial Brands: Stable profitability in traditional tobacco, smoke-free transformation awaits breakthrough. For FY2025, the company expects net revenue from tobacco and new tobacco to reach 8.32 billion, with adjusted operating profit at 3.67 billion, yielding a profit margin of about 44%; among this, new tobacco revenue is only 370 million, accounting for 4.4%, with adjusted operating profit reduced to -79 million. The company expects double-digit growth in new tobacco revenue from 2025 to 2030, with average annual growth in adjusted operating profit of 3%-5%. Risk warnings: Regulatory policies tightening more than expected, higher-than-expected tax burdens, risks of product iteration and market competition, exchange rate fluctuation risks, litigation and compliance risks, risks of external demand fluctuations, etc.