The Zhitong Finance App learned that Daiwa released a research report saying that it downgraded the Smore International (06969) rating from “outperforming the market” to “hold”, and the target price was drastically lowered from HK$17 to HK$7.6, and estimated at a target price-earnings ratio of 27 times the average earnings per share from 2026 to 2027, which is equivalent to 1 times the predicted price-earnings growth rate (PEG) in 2026, which is consistent with the overall OEM industry. The bank believes that e-cigarette products are expected to bring sales surprises, and that new hot tobacco (HNB) customers will also offset the impact of British and American tobacco inventory removal in the Japanese market, but the valuation fully reflects the medium- to long-term potential.
Yamato indicates that two major catalysts can drive SMOORE's major customers to seize market share in e-cigarette products: continued strengthening enforcement actions against substandard products, and the US Food and Drug Administration (FDA) first approved the sale of fruit-flavored e-cigarettes in May 2026. British American Tobacco recently raised its new organic sales growth guide for the first half of 2026 and the full year to the middle ten digits (about 13% to 17%). Previously, it was ten digits lower (about 10% to 13%). SMOORE previously guided sales growth of more than 10% in FY2026, and the bank expects sales of e-cigarette products to surpass the guidelines in the upcoming interim results. Furthermore, as new HNB customers are expected to join in the second half of the year, their HNB product sales target of RMB 2 billion should be easily achieved.
However, based on the market's comprehensive 2026 and 2027 price-earnings ratios of 30 times and 20 times, respectively, compared to the average of 14 times and 12 times that of other OEM (OEM) peers over the same period, Yamato believes the potential has been fully reflected. The bank expects net profit to grow at a compound annual rate of 28% from 2026 to 2028, and profits will accelerate from 2027.