CICC published a research report stating that it maintains a " outperform Industry" rating for SMOORE INTL (06969), with a Target Price of 13.5 Hong Kong dollars. On December 27, the company announced a stock option plan and a stock reward plan, planning to grant 61 million stock options to Mr. Chen Zhiping and 12 participants at a grant price of 11.26 Hong Kong dollars per share, and plans to grant 1.416 million shares of reward shares to 9 participants.

The institution is Bullish about the company's long-term growth prospects as a Global vaping technology platform. The existing Business is expected to benefit from stricter overseas regulations and an increase in market share from major clients, while the commercialization of new businesses such as heated not-burn (HNB), Medical vaping, and beauty is likely to become a new engine for growth, offering significant long-term growth potential.

CICC's main points are as follows:

1. The goal for 2030 is for the company’s Market Cap to not be less than 300 billion Hong Kong dollars, reflecting the management's confidence in long-term development.

In this round, the stock options granted to Mr. Chen Zhiping are based on the company's Market Cap as the assessment target. If the average Market Cap reaches or exceeds 300/400/500 billion Hong Kong dollars for any consecutive 15 business days between January 1, 2025, and December 31, 2030, 30%/60%/100% of the stock options can be vested; the assessment targets for the remaining participants' Stock-based Incentive and share rewards are formulated based on the participants' positions, terms, and performance evaluation results. The institution considers that the Market Cap target set for this stock-based incentive is proactive; the medium to long-term assessment highlights the management's Global Strategy and confidence in development. The core personnel assessment targets are reasonably set to effectively align the interests of the core team, motivate employees, and drive internal development dynamics.

2. Introduction of major HNB clients and promotion of commercialization, accelerating the cultivation of Medical vaping and beauty.

The company drives the development of the vaping technology platform through R&D. The institution estimates that from 2022 to 2024, the company will have accumulated R&D investments exceeding 4.5 billion yuan, with new businesses gradually entering a harvest phase. 1) HNB: The company has developed differentiated forward heating technology, optimizing product weight, heating speed, pause in use, flavor consistency, and other dimensions compared to existing products, and has now introduced British American Tobacco's Glo.

Hilo Order; the institution believes that with the customer's global sales promotion, the HNB business may welcome a harvest phase in 2025, contributing to performance increments; 2) Medical vaping: The company is advancing the development of drug-device combination products for COPD and asthma, simultaneously growing external empowerment in vaping technology; 3) Vaping beauty: The company will launch the "Lan Zhi" product solution in March 2024, targeting both C-end and B-end markets to support subsequent growth.

3. Bullish on the strengthening of overseas regulation and the commercialization of new businesses, the company has a broad long-term growth prospect as a global leader in Technology aerosol.

Among the existing businesses, the bank believes that with the implementation of the European disposable ban and strengthened regulation of electronic cigarettes in the USA, the Industry is expected to usher in standardized development, and the company, as a compliant leader in multiple categories, is likely to benefit from the growth of the compliant market and the increase in global share among major clients; in new businesses, the commercialization of HNB is expected to bring incremental performance, and Medical aerosol and beauty will also accelerate cultivation.

Risks: policy and regulatory risk, client dependency risk, technology risk, Exchange Rates volatility.