A three-quarter report with a profit increase of 18% month-on-month was exchanged for short-term stock price pressure. Behind Smore International's (06969) 2026 three-quarter report is a head-on collision between fundamentals and policies.
Recently, Smore International disclosed its third-quarter results. The profit for the period was 365 million yuan, up 15.2% year on year and 18.0% month on month. Delivery of electronic atomization products in the US market was gradually implemented, the heating and non-combustion business improved month-on-month, and the repair signal at the business level was not vague. However, on the same day, the Ministry of Finance and the State Administration of Taxation announced the cancellation of value-added tax export rebates for products such as e-cigarette equipment from April 1, 2027, and the market immediately voted to select the expectation that the price would rise in certainty after 2027.
The e-cigarette industry is gradually entering a new stage of restoration after many rounds of policy adjustments and fluctuations in global demand, and Smore's financial report just happened to stand at the intersection of old dividends fading and new logic verification.
Export tax rebates have completely withdrawn, and rising cost certainty suppresses valuations
To understand Smore's current situation, we need to first understand what export tax rebates mean to this company. According to the Zhitong Finance App, SMORE is the world's largest manufacturer of electronic atomization equipment, accounting for a very high share of export business. For a long time, the 13% export VAT refund was an integral part of its profit structure that cannot be ignored. The first round of adjustments in April 2026 has already abolished tax rebates for nicotine-containing e-cigarette products and heated tobacco equipment, while the second round of announcements on October 12 further included categories such as e-cigarette atomization equipment, nicotine, and salt in the scope of cancellation. After the two rounds of policies are combined, export tax rebates for all finished e-cigarette devices will be completely eliminated.
The actual impact of the cancellation of tax rebates on exports can already be traced in previous data. The first adjusted export data in April of this year provides an intuitive reference: China's e-cigarette exports plummeted to US$694 million in the same month, down 20.9% year on year and 23.2% month on month, the lowest level in the same period in nearly three years. The cancellation of tax refunds directly changed the cost calculation method for foundry companies. The amount of tax rebates that had previously been included in profits suddenly disappeared, and companies with limited ability to raise prices would face losses. Some analysts point out that foundries will enter a “state of marginal profit or even loss,” and it is inevitable that the industry will speed up clearance. For SMOORE, the 13% tax refund gap needs to be filled by product structure upgrades or customer bargaining, and this cannot be done overnight.
However, the policy also leaves a buffer window. The execution node on April 1, 2027 means that until then, brands had a rational incentive to prepare goods in advance. The Zhitong Finance App noticed that based on market behavior before the policy adjustment in April of this year, centralized procurement from overseas customers boosted the same industry's revenue in the first quarter, then declined in the second quarter. This kind of “overdraft” order rhythm disturbance requires careful screening. For investors, it remains to be seen whether the recovery in orders in the fourth quarter was an improvement in real demand or a rhythmic effect of the policy window period.
Taste delivery and HNB break the game, and the compliance market takes over the growth engine
Export tax rebates are a supply-side cost shock, and SMOORE's demand-side story presents a different picture. According to the latest announcement, the company's revenue from atomized products for corporate customers in the third quarter of this year was about 2.65 billion yuan, up 16.4% month-on-month and 1.8% year-on-year. The core driving force for growth came from the US market — the company began delivering fruity and other compliant flavor products to core customers during the period.
The significance of this development far exceeds single-quarter revenue figures. Since the FDA established the PMTA approval framework, non-tobacco, non-mint-flavored e-cigarette products have almost been excluded from the compliance market. In May 2026, the FDA approved non-tobacco and non-menthol e-cigarette products for the first time. The four approved products are equipped with device access restriction technology, including functions such as age verification and Bluetooth pairing locking with government-issued ID cards. This indicates that the US market channel for compliance-flavored e-cigarettes is being redefined. According to the Cinda Securities Research Report, four fruit-flavored products from the core customer British American Tobacco have been officially launched. It plans to sell to about 25,000 retail outlets in September, and add about 25,000 more in November.
From a broader perspective, structural changes in the US market are reshaping the flow of Chinese e-cigarette exports. According to the data, in July 2026, China's overall export value of e-cigarette related products reached US$1,047 billion, an increase of 16.5% over the previous year, and reached a new monthly high during the year. However, this increase was highly concentrated in the US market: exports to the US increased 53.5% year over year, contributing 94.9% of the overall increase for the month, while markets outside the US grew by only 1.2%. The August data immediately reversed. Although the overall export value was still up 3.3% year over year to US$979 million, the growth rate slowed significantly. Exports to the US fell by 12.4%, and the growth engine switched to the UK, which increased by 51.4% in the same month.
Looking at the two sets of data together, one fact is clear: the current growth of China's e-cigarette exports is highly dependent on the order rhythm of the US single market, and this concentration is both a source of short-term volume and a source of volatility. Once FDA enforcement policies are reversed due to lawsuits or political pressure, or the pace of delivery of core customers is adjusted, the growth model that relies on the volume of US flavor products will face a direct stress test.
In addition to the atomization business, the third-quarter data for the heating does not burn business is also worth disassembling. During the period, revenue from HNB products was about 397 million yuan, an increase of 33.2% over the previous year, but a year-on-year decrease of 47.8%. In response, the company said that the reason for the sharp year-on-year decline was due to the extremely high base of large-scale shipments to a core customer in the same period last year. What is more signalling is the magnitude of the month-on-month improvement — the 33% month-on-month increase means that the actual operating volume of the HNB business is recovering after the core customer order rhythm returns to normal.
According to Cinda Securities analysis, the company began providing comprehensive HNB solutions to new customers in the third quarter, and further increases are expected to be released in the fourth quarter. The company's management placed HNB at the top of the company's strategy when the interim report was released, and made it clear that “the multi-customer strategy has entered the actual implementation stage.” HNB's revenue increased 322% year over year in the first half of the year. To the implementation of the new customer plan in the third quarter, the trajectory of this business line is not linear growth, but more like a technology platform waiting for the gradual expansion of the customer matrix.
The HNB industry itself is in the early stages of releasing technology dividends. As the world's largest HNB market, Japan's penetration rate has reached 40% to 50%, but performance differences between products are still significant, and suppliers with exclusive patents and iterative capabilities have the ability to overcome the competitive cycle. The core customer, the HNB brand under British American Tobacco, has a market share of 13%. High-end products continue to be sold, and second-generation products are scheduled to be launched in the fourth quarter. This pace echoes SMOORE's multi-customer strategy: the iterative needs of core customers provide basic plans, and the implementation of new customer solutions provides incremental flexibility.
Cinda Securities pointed out that SMOORE's low profit point has passed, and fourth-quarter revenue is expected to increase month-on-month and return to year-on-year growth. The basis for this judgment comes from several levels of observation. After recovering stock payments and medical business losses, the company's net interest rate for the third quarter was 12.54%, a steady increase over the previous year. The contraction on the cost side and the improvement in the product structure are taking effect. Revenue growth in the third quarter was 17.7% month-on-month. If it continues in the fourth quarter due to new products and new customers, a return to year-on-year growth is not an aggressive assumption.
However, after all, brokers' optimistic predictions are based on assumptions, and what really determines whether these hypotheses are true is the shift in growth logic that Smore is experiencing. Over the past few years, the company's growth engine has been a combination of policy arbitrage and scale effects — using the cost advantage of export tax rebates to serve the incremental demand of global tobacco giants with an OEM model. When export tax rebates are fully withdrawn and the bargaining space in the OEM process is compressed, new growth must come from capabilities that are more difficult to replace: entry barriers to the compliant market, HNB's technical patent reserves, and the speed of building multi-customer matrices. The delivery of American-flavored products and the launch of HNB's new customer program in the third quarter earnings report are early signs of this capacity change. Whether the low profit point has passed ultimately depends not on short-term contraction on the cost side, but on whether these new capabilities can grow into sufficient growth engines to take over before the buffer window closes in 2027.
Taken together, the elimination of export tax rebates suppresses the industry's overall profits, but it may also accelerate the clearance of low-end production capacity, and the leading share logic has not been destroyed. For SMOORE, the real test is whether US compliant flavor products and HNB multi-customer volume can take over the growth before the buffer window closes in April 2027. Short-term policy shocks have been priced by the market, and the verification path for the new engine in the medium term is yet to be fully understood — this is the core of the current pricing differences, and it is also a window for long-term investors to re-examine the company.