China Tobacco's only listed asset. It has an asset-light model, high ROE and abundant free cash flow, and strong performance certainty under the monopoly system. With the continuous expansion of exclusive business scope, overseas mergers and acquisitions, and strategic cooperation, leapfrog growth can be expected. Valuation enters a reasonable range as performance grows and stock prices recover, so long-term allocation is recommended. Company: China Tobacco's overseas capital operation and business development platform. The company is the only listed asset under China Tobacco, and is strategically positioned as a designated overseas platform for capital operation+international business development. The company's main business is the import of tobacco leaf products, the export of tobacco leaf products, the export of cigarettes, and the export of new types of tobacco. The company's revenue in 2019 accounted for 52%/24%/24%/0.3% respectively. The company's business model is to earn a fixed percentage of the difference in the import and export trade of tobacco products. It has the characteristics of low net profit margin, high turnover, high ROE, and abundant free cash flow. Industry: Internationalization and development of new types of tobacco are the path to breaking the game. According to Euromonitor data, global cigarette sales in 2019 were -1% year-on-year, and are expected to continue to decline by -1% to -2% in the next 3 years, but there are structural growth opportunities in emerging markets such as the Middle East, South Asia, Southeast Asia, and Africa. The world's leading tobacco companies have achieved an international layout, relying on market share expansion in emerging markets to drive performance growth. China Tobacco's global share of cigarettes is nearly half (44%), but its overseas share is only about 0.6% (tax exempt only), so there is huge room for improvement. The global new tobacco industry is in a period of penetrating growth. International tobacco giants all strategically place new tobacco products. In 2018, Fimo International, British American Tobacco, and Japanese Tobacco accounted for 14%/4%/0.1% of new tobacco revenue. Outlook: High certainty coexists with growth expectations. The monopoly system has the color of a planned economy, bringing high certainty to the company's performance. It is estimated that in 2019, the company's business scale accounted for 58% of the Chinese tobacco-related business, and the share is expected to increase further in the future; the overseas market share of the cigarette export business needs to be increased urgently, and 65% of the IPO capital raised is planned to be used for foreign acquisitions or strategic cooperation. Comparing the rise of Fimo's international mergers and acquisitions, leapfrog growth can be expected. On the other hand, if the proportion of self-employed cigarette exports increases from less than 10% to 20% at present, it is estimated that the gross margin of cigarette exports is expected to increase by 3.8-6.8pcts; the company's new tobacco (HNB) exports have just begun, and are expected to continue to grow rapidly, relying on the technical and market support of China Tobacco HNB. Risk factors: Major changes in the national tobacco monopoly system; major changes in tobacco-related policies and regulations in target markets; import and export controls and international trade frictions; exchange rates fluctuate greatly; and the global tobacco control process has exceeded expectations. Investment advice: With the continuous expansion of the company's exclusive business scope and the advancement of overseas mergers and acquisitions and strategic cooperation, the company can be expected to achieve leapfrog growth. The company's EPS for 2020-22 is forecast to be HK$0.53/0.59/0.63, respectively. Given the company's exclusive market position, high certainty of performance, and scarcity of targets, a comprehensive DCF model and relative valuation, it is determined that the company's reasonable market value is about HK$15 billion, with a target price of HK$21.22 per share, corresponding to 40x PE in 2020, and given a “buy” rating for the first time.