Lyon has released a research report projecting that SMOORE INTL (06969) will see net profit and adjusted net profit decline by 44% and 7% year-on-year respectively this year, with growth expected to resume in 2026-2027. The firm forecasts a gross margin of 36.4% for this year, improving to 38.8% next year, and anticipates the group's compound annual growth rate for sales and adjusted net profit from 2025 to 2027 to reach 16% and 48% respectively.

Lyon has reduced its target price from HK$24 to HK$21 while maintaining an "outperform" rating. The company's first-half results showed sales growth of 18% year-on-year, while net profit fell 28% and adjusted net profit dropped 2%, in line with previous profit warnings. The decline in net profit was primarily attributed to a significant decrease in China sales and lower gross margins due to product mix adjustments.

Lyon expects this year's sales to be mainly driven by capsule products, following the EU ban on disposable e-cigarettes and the expansion of Advanced Personal Vaporizers (APV) and Heat-not-Burn (HNB) products. Management indicated that this year will also be an investment year, with plans to allocate an additional RMB 300 million for research and development in medical and HNB products.