HUABAO INTL (00336) surged over 15% in morning trading. As of press time, the stock was up 14.18% to HK$4.51 with a trading volume of HK$214 million.

On the news front, HUABAO INTL previously released its financial results, reporting revenue of RMB 1.621 billion for the first half of the year, up 2.5% year-on-year. Profit attributable to equity holders reached RMB 118 million, representing a significant increase of 298.1% year-on-year. Basic earnings per share stood at 3.66 cents. The company proposed an interim dividend of 1.2 HK cents per share and a special dividend of 3.2 HK cents per share.

The revenue increase was primarily driven by rapid growth in overseas tobacco new materials business. The tobacco materials segment saw revenue surge 45.3% year-on-year to RMB 238 million, while the fragrance materials segment recorded revenue growth of 7.6% year-on-year to RMB 405 million, benefiting from gradual capacity release and new customer acquisition.

HUABAO INTL is reportedly a leading domestic tobacco flavor company. Industry analysis indicates that HNB (Heat-not-Burn) tobacco operates at lower temperatures than traditional cigarettes, reducing the production of flavor compounds through thermal synthesis and pyrolysis. Therefore, more flavors and fragrances need to be added to restore and simulate the taste of cigarettes. For the same quality of tobacco, HNB tobacco requires 6-10 times more flavoring than traditional tobacco. However, considering that HNB cigarette sticks are half the length of traditional cigarettes, the overall flavoring usage per stick for HNB is 3-5 times that of traditional tobacco.