Cathay Pacific Haitong: The scale of the HNB industry is also expected to accelerate expansion, recommend Smore International (06969), etc.

The Zhitong Finance App learned that Cathay Pacific Haitong released a research report saying that the British American Tobacco (BTI.US) new tobacco business growth accelerated in the second half of 2025, and the industry chain is expected to benefit from the boom. Currently, the global HNB industry has entered a new round of product life cycle, and the scale of the industry is expected to expand at an accelerated pace as major brands actively develop the market. We recommend SMOORE International (06969) and British American Tobacco, which are relevant targets with product technology and supply chain competitiveness.

Cathay Pacific Haitong's main views are as follows:

HNB: Excellent market feedback for new products, accelerating global expansion in 2026

Revenue growth was steady throughout 2025, affected by competitive activity and resource reallocation. The sales share of the GLO brand in major global markets - 1.2 pct, is mainly affected by competition in Japan, while the company is phasing out traditional equipment lines. Glo Hilo, a new high-end product, reached 1% in Japan (2% in the high-end market), and Poland and Italy gained market share faster. In 2026, the Glo brand targets a narrowing of the overall share decline and a steady recovery, mainly driven by Glo Hilo.

Vaporized e-cigarettes continue to benefit from market environment optimization, and the high growth rate of new oral cigarettes continues

Improvements in the US market drove up revenue performance in 2025 H2 (-13% YoY in 2025H1). The Vuse brand has a value share of +0.1 pct in the main market, including +0.7 pct in the US. Some market growth was affected by illegal e-cigarettes in Canada. Meanwhile, the new high-end product Vuse Ultra has performed well in the Canadian, German and French markets, and is expected to accelerate global promotion in 2026. In terms of new mouth-containing cigarettes, Velo Plus will drive three-digit growth in the US region throughout 2025, driving a market rate of +9.2pct to 15.6% in the US region, and +5.9pct to 31.8% in the world's main market share. At the same time, Velo Plus has begun entering the European market and is expected to initially adopt a promotion strategy similar to the US. In terms of new products, Velo Shift has received positive feedback in the Swedish market since September 2025.

The steady operation of traditional cigarettes led to the accelerated growth of new types of tobacco in the second half of the year, and the increase in repurchases in 2026

The value share of the company's cigarette business remained flat in the main global market in 2025, and the sales share fell 0.1 pct. Among them, the US region's value share was +0.2 pct, and the sales share remained flat. The improvement in cigarette business in the second half of the year was mainly driven by the US market, mainly due to the strengthening of business activity in the second half of the year, the promotion of DTC business, and the overall improvement of the cigarette market environment (increase in US employment). In addition, according to the company's announcement, revenue for fiscal year 2025 and adjusted operating profit are expected to increase by about 2%. Among them, revenue growth from new types of tobacco accelerates, achieving double-digit growth in the second half of the year, driving the middle single digit of growth for the full year of 2025. The 2026 results are at the lower end of the growth guide (revenue growth of 3%-5%, adjusted EPS growth of 5%-8%). Meanwhile, the company announced that the repurchase effort will increase to £1.3 billion in 2026 (£1.1 billion in 2025).

Risk warning: US enforcement falls short of expectations, and marketing of new products falls short of expectations.