Analysts at Founder Securities Co.,Ltd. have reiterated their "recommend" rating for CTIHK (06055), forecasting sustained growth driven by both its core operations and strategic expansions. The firm is highlighted as the sole listed platform under China Tobacco International, benefiting from exclusive operating rights across several key business segments.
The brokerage projects the company's revenue for 2026-2027 to reach 14.2, 15.5, and 16.7 billion yuan respectively, equivalent to 15.8, 17.1, and 18.5 billion Hong Kong dollars, representing year-over-year growth of 8%, 9%, and 8%. Net profit attributable to shareholders is forecasted at 970 million, 1.16 billion, and 1.32 billion yuan, or 1.12, 1.35, and 1.53 billion Hong Kong dollars, with year-over-year increases of 14%, 20%, and 14%.
Strategic Platform with Exclusive Advantages
CTIHK is positioned as the strategic platform for capital operations and international business expansion within the China Tobacco system. With a wealth of overseas assets within the group, there exists potential for future asset injections into the listed entity, which could significantly enhance its profitability and act as a catalyst for valuation re-rating.
Core Business Analysis
The leaf tobacco import and export business forms the company's solid foundation. For imports, it sources products from countries like Brazil, the US, and Argentina and sells them as the exclusive supplier to China Tobacco International. Driven by supply chain integration and product mix optimization, this segment has seen both volume and price increases alongside improved profitability from 2018 to 2025. On the export side, while subject to overseas demand fluctuations, the company has expanded its coverage areas and refined pricing strategies to foster growth.
Recovery and Growth in Other Segments
The cigarette export business is in a recovery phase, buoyed by the post-pandemic rebound in cross-border travel. Export volume and average selling price in 2025 had recovered to 59% and 132% of 2019 levels, respectively, leading to a 77% recovery in revenue. Efforts to increase the proportion of self-operated business and expand channels have notably lifted gross margins. The new tobacco export business, primarily comprising HNB products, is in an early rapid growth stage targeting markets in Southeast Asia, the Middle East, Europe, and Central Asia.
Overseas Expansion and Synergies
The 2021 acquisition of China Tobacco Brazil marked a strategic move overseas and upstream in the supply chain. The Brazilian export business revenue grew at a compound annual rate of 57% from 2021 to 2024. This expansion, coupled with measures to scale farmer contracts and optimize operations, has driven volume and price growth. Furthermore, the supply chain integration benefits from this acquisition have positively spilled over, enhancing profitability in the leaf tobacco import and cigarette export segments.
Key Risk Factors
Potential risks include changes in global tobacco control policies, geopolitical impacts on import/export demand, adverse natural weather events, and the possibility that growth in the new tobacco business may fall short of expectations.
Comments