CICC released a research report, adjusting SMOORE INTL's (06969) 2025 net profit attributable to shareholders forecast down by 20% to RMB 1.05 billion (corresponding to flat year-over-year growth after adjusting for stock-based compensation expenses), considering the impact of stock-based compensation costs. The firm raised its 2026 net profit forecast by 11% to RMB 1.88 billion, anticipating performance release driven by large-scale HNB tobacco stick shipments. The current stock price corresponds to 47x P/E for 2026. CICC maintains its outperform rating and keeps the target price unchanged at HK$23, considering market risk appetite adjustments, corresponding to 69x P/E for 2026 (0.88x PEG for 2026), implying 46% upside potential.
CICC's main views are as follows:
**Q3 2025 Performance Meets Expectations**
The company announced its Q1-Q3 2025 results, with revenue reaching RMB 10.21 billion, up 21.8% year-over-year. Net profit attributable to shareholders was RMB 810 million, down 23.8% year-over-year. After adjusting for stock-based compensation expenses, net profit attributable to shareholders was RMB 1.18 billion, up 0.1% year-over-year. On a quarterly basis, Q1/Q2/Q3 2025 net profits were RMB 200 million/300 million/317 million respectively, with year-over-year changes of -43.4%/+12.7%/-16.4%, meeting the firm's expectations.
**Glo Hilo Steadily Advances in Japan and Poland Markets, European Vaping Business Continues Growth**
Looking at Q3 2025 revenue breakdown: 1) HNB: British American Tobacco's Glo Hilo is now fully launched in Japan and Poland. CICC believes Glo Hilo's flavor reproduction, heating speed, and brand image are all in the industry's first tier. Recent terminal sales momentum has been generally positive, with heating devices shipping first expected to contribute to revenue; 2) Vaping: The firm expects that under Europe's disposable ban, the company's differentiated compliant products from small and medium brand partnerships are selling actively, likely driving continued rapid growth in European business revenue. Under strengthened U.S. regulation, orders are expected to remain relatively stable; 3) APV: Open-system proprietary brands lead global market share, with CICC expecting continued year-over-year growth in Q3 2025.
**Stock-Based Compensation Expense Allocation Affects Short-term Profitability, R&D Investment Remains High**
In the short term, CICC expects the company's gross margin may face slight pressure due to rapid growth in orders from small and medium European vaping customers and early sales of HNB heating devices. As vaping orders ramp up and high-margin HNB tobacco stick business sales increase, profitability is expected to improve continuously. On the expense side, the company has increased R&D investment in medical vaping and new HNB businesses, combined with stock-based compensation allocation impact, resulting in Q3 2025 net profit/adjusted net profit declining 16.4%/growing 4% year-over-year.
**Optimistic About Long-term Growth Prospects Driven by Global HNB Rollout and Accelerated Medical Vaping Commercialization**
1) HNB: CICC expects Glo Hilo to accelerate expansion in core global markets in 2026, with concentrated tobacco stick shipments expected to drive performance release. New products, new technologies, and new customers open up medium to long-term growth space; 2) Medical Vaping: As device-drug combination complex generic drug R&D accelerates and innovative drug BD partnerships gradually materialize, medical vaping is expected to achieve commercial landing, opening up medium to long-term growth space.
**Risk Warnings:** Policy and regulatory risks; customer dependency risks; technology risks; exchange rate fluctuation.