Stock Analysis & Valuation Smoore International Holdings Limited (6969.HK)

• Previous Close: HK$11.32
• Sector Valuation Confidence Level: Low

Valuation method	Value, HK$	Upside, %
Artificial intelligence (AI)	34.90	208
Intrinsic value (DCF)	6.20	-45
Graham-Dodd Method	3.60	-68
Graham Formula	3.10	-73

Strategic Investment Analysis

Company Overview

Smoore International Holdings Limited is a leading global provider of vaping technology solutions headquartered in Shenzhen, China. As a pioneer in the vaping industry, Smoore researches, designs, and manufactures both closed-system vaping devices for tobacco companies and independent vaping firms, as well as open-system devices for retail consumers under its renowned Vaporesso and FEELM brands. Operating internationally across key markets including the United States, United Kingdom, Europe, and Asia, Smoore has established itself as a critical technology partner in the rapidly evolving tobacco alternatives sector. The company's expertise in vaporization technology and manufacturing scale positions it at the forefront of the global shift from traditional tobacco products to reduced-risk alternatives. With strong R&D capabilities and partnerships with major tobacco companies, Smoore plays a vital role in the consumer defensive sector's transformation, offering innovative solutions that cater to changing regulatory landscapes and consumer preferences worldwide.

Investment Summary

Smoore International presents a compelling investment case as a technology enabler in the rapidly growing vaping and reduced-risk product market. The company's strong financial position with HKD 5.17 billion in cash and equivalents provides stability, while its diversified client base spanning major tobacco companies and independent brands reduces customer concentration risk. However, investors should note significant regulatory headwinds as vaping regulations continue to evolve globally, particularly in key markets like the US and Europe. The company's beta of 1.138 indicates higher volatility than the market, reflecting regulatory sensitivity. While the dividend yield appears attractive, the compressed net margin of approximately 11% and regulatory uncertainties require careful monitoring. The investment thesis hinges on Smoore's ability to maintain its technological leadership and navigate complex regulatory environments while capitalizing on the secular shift away from traditional tobacco products.

Competitive Analysis

Smoore International maintains a strong competitive position through its dual business model serving both B2B clients (tobacco companies) and B2C markets with its proprietary brands. The company's technological advantage is evidenced by its extensive R&D capabilities and the FEELM ceramic coil technology, which has become an industry standard for consistent vapor production and flavor delivery. Smoore's scale manufacturing capabilities in China provide cost advantages that smaller competitors cannot match, while its partnerships with major tobacco companies create significant barriers to entry through established supply relationships and regulatory compliance expertise. However, the company faces intensifying competition from both specialized vaping technology firms and traditional tobacco companies developing in-house capabilities. Regulatory pressures represent the most significant competitive threat, as changing requirements across different jurisdictions could disadvantage certain technologies or business models. Smoore's global footprint provides diversification benefits but also exposes it to multiple regulatory regimes. The company's ability to continuously innovate while maintaining compliance across markets will be critical to sustaining its competitive advantage in this rapidly evolving industry.

Major Competitors

• RLX Technology Inc. (RLX): RLX Technology is a major Chinese competitor focused primarily on the domestic market with its RELX brand. The company has strong brand recognition in China but faces significant regulatory challenges in its home market following China's vaping crackdown. Unlike Smoore's diversified B2B and international focus, RLX is more concentrated in B2C and domestic sales, making it more vulnerable to regulatory changes in specific markets. RLX has been expanding internationally but lacks Smoore's established relationships with major tobacco companies.
• British American Tobacco PLC (BAT.L): BAT is both a customer and potential competitor to Smoore through its Vuse vaping products. As one of the world's largest tobacco companies, BAT has extensive resources for R&D and distribution but often partners with technology specialists like Smoore for component manufacturing. BAT's strength lies in its global distribution network and brand portfolio, but it may increasingly develop in-house capabilities, potentially reducing its reliance on external suppliers like Smoore over time.
• Philip Morris International Inc. (PM): PMI is a key Smoore customer for its IQOS devices but also represents competitive pressure as it develops its own reduced-risk platforms. PMI's massive scale, global presence, and significant R&D budget make it a formidable competitor if it chooses to vertically integrate. However, PMI's current focus on heated tobacco rather than vaping creates both partnership opportunities and competitive tensions with Smoore's vaping technology focus.
• Juul Labs, Inc. (JLI): Juul remains a significant competitor in the vaping space despite its regulatory challenges, particularly in the US market. The company's strong brand recognition and sleek device design made it market leader, but ongoing legal and regulatory issues have weakened its position. Unlike Smoore's B2B focus, Juul is primarily a consumer-facing brand, though it may increasingly seek technology partnerships as it addresses its manufacturing and regulatory challenges.