Event: the company released its mid-2021 report. During the reporting period, the company achieved a total revenue of HK $3.694 billion, an increase of 96.03% over the same period last year, and a net profit of HK $130 million, an increase of 126.75% over the same period last year.
Strengthen the supply chain coordination after the epidemic, tobacco imports and new tobacco products export revenue increased significantly. In the first half of the year, the company's tobacco products export business achieved sales income of 1.074 billion Hong Kong dollars (29.1% of revenue), an increase of 3.57% over the same period last year. The export volume was 44000 tons (+ 14.92%), mainly benefiting from the company's active adjustment of business strategy and product structure. Speed up the pace of supply after the epidemic The import business of tobacco products achieved a sales income of 2.569 billion Hong Kong dollars (69.5% of revenue), an increase of 223.32% over the same period last year, and the import volume was 56000 tons (+ 356.28%). Speed up the arrival of imported tobacco products in Hong Kong The cigarette export business achieved sales revenue of 28 million Hong Kong dollars (0.7% of revenue), down 44.02% from the same period last year, and the export volume was about 1600 cases (- 37%). Mainly affected by the global epidemic, the number of customers in duty-free shops covered by the company decreased significantly. The export business of new tobacco products achieved sales revenue of HK $23.748 million (0.5 per cent of revenue), an increase of 554.5 per cent over the same period last year, and the export volume was about 2048 boxes (+ 544.03 per cent), mainly due to the company's tight grasp of new global tobacco development opportunities. build a rapid coordination and response mechanism of the supply chain, and continue to expand emerging markets and channels.
We believe that the company is the international business development platform designated by China National Tobacco Corporation and the exclusive operating entity of related trade business. as the epidemic has been gradually brought under control, global trade and consumption have shown a trend of recovery. the company's import and export business income has increased significantly in the first half of the year, and the company's business sectors are expected to continue to achieve high-quality growth steadily. At the same time, the company actively seeks a two-way breakthrough in capital operation and innovative business.
The company's business model has outstanding advantages and strong scarcity.
Scarcity advantage: China Tobacco Hong Kong has the exclusive right to operate the relevant tobacco international business. According to document No. 60 of China National Tobacco Corporation, China Tobacco Hong Kong is the exclusive operating entity designated by China National Tobacco Corporation to engage in international business development platform and related trading business. We believe that this "exclusive status" is relatively rare and may continue to benefit from overseas expansion and equity mergers and acquisitions of China Tobacco in the future.
Business model advantages: steady cash flow, strong bargaining power. The company relies on China Tobacco Group, and its income has increased steadily in recent years; at the same time, due to the existing pricing policy, the gross profit margin of each business is less volatile and has higher anti-risk ability; business model and license advantages determine that the company has stronger bargaining power and better cash flow; overseas tobacco brands and channels may be acquired in the future to enhance competitiveness.
With the help of the new type of tobacco, China Tobacco Hong Kong may open a new chapter in its development.
International tobacco giants have begun to focus their research and development on the new field of tobacco, and the market scale has increased rapidly in recent years. PMI 2020H1's new tobacco segment has revenue of US $4.398 billion, accounting for 28.5% of the total revenue of 460.9 million cigarettes (920,000 boxes) of IQOS, up 30.1% from a year earlier.
At present, there are relatively few types of heated non-combustible products in China, and the domestic market is not yet open, but the development momentum is strong. At present, large and medium-sized tobacco companies accelerate the research and development of layout technology, and the products are only for overseas export; at the same time, the unique "Chinese-style flue-cured tobacco" flavor modulation technology of Chinese tobacco will also lay a good foundation for meeting the unique preferences of consumers at home and abroad.
Profit forecast and valuation
We believe that the company relies on China Tobacco Group and has significant advantages in barriers, which is the only international business platform under the flag of China Tobacco at present, and is expected to be the direct beneficiary of the development and reform of China's tobacco industry. We estimate that the company's annual revenue in 21-22-23 will be HK $9.41 billion and net profit will be HK $2.11 billion and HK $295 million. The company is the only international business platform in China Tobacco system and gives "buy".
Rating.
Risk hints: policy change risk, sales below expectations, new tobacco development less than expected, M & An integration risk