Core views:
The company disclosed its 2020 annual report, achieving revenue of HK$3.48 billion in 2020, a year-on-year decrease of 61.2%; the return mother's net profit was HK$95 million, down 70.2% year on year, within the range of the previous earnings warning.
Among them, 20H2 revenue fell 68.4% year-on-year, and was seriously affected by the epidemic in 2020.
Traditional businesses have declined, and new types of tobacco have surged. Revenue from the import business of tobacco products fell 70.8% year-on-year in 2020. Although demand increased, the progress of tobacco production in some tobacco leaf-producing regions was delayed, and the global supply chain was blocked in the second half of the year, capacity declined markedly, and the delivery cycle was extended. Revenue from the export business of tobacco products fell 10.4% year on year. Despite the negative impact of the pandemic, the business remained relatively stable due to rigid tobacco demand and close relationships between companies and customers. Revenue from the cigarette export business fell 92.7% year on year. Local governments implemented border controls. Affected by this, duty-free shops were suspended, and passenger flow declined sharply. Revenue from the export business of new tobacco products increased 42.8% year-on-year. The global market expanded steadily, the strength of Chinese tobacco products continued to increase, and exports of new tobacco products bucked the trend.
Profits are under a bit of pressure. The company's gross margin fell 0.7 pct to 4.0% year on year in 2020, mainly due to a decline in the share of relatively profitable tobacco leaf import and cigarette export business; the management fee ratio increased 1.2 pct year on year, mainly due to a sharp decline in revenue; and benefiting from increased exchange gains and loss and interest income, the company's other net revenue increased 44% year on year, and net interest rate fell 0.8 pct year on year.
Looking ahead to 2021, although current border controls and travel restrictions continue to suppress company sales, the global epidemic is expected to improve after the vaccine is popularized at an accelerated pace. Furthermore, the new tobacco business continues to soar, and the company can also expand exports of other categories such as atomized tobacco to meet global demand trends.
Profit forecasts and investment recommendations. China Tobacco Hong Kong's overall performance is expected to recover steadily after the outbreak.
The company's revenue for 21-23 is expected to increase 54.7%/42.7%/29.9% year on year, and net profit to the mother will increase 75.1%/66.7%/36.5% year on year. No ratings will be given yet.
Risk warning. Other countries have raised taxes on imports of tobacco products; regulations on new types of tobacco products have become stricter; the global pandemic has affected the resumption of work on imports.