Xingzheng International: Assigns "Buy" rating to CTIHK with stable dividend growth

According to the Zhitong Finance APP, Xingzheng International released a research report stating that China Tobacco Hong Kong (06055) has stable performance, enhancing profitability through product structure and business model optimization, while maintaining a steady growth in dividend returns to shareholders. The company will continue to play the role of an integration platform for China Tobacco's overseas business. The bank expects the company's operating revenue for 2025/2026 to be HKD 15.39 billion / HKD 16.47 billion, and the net profit attributable to shareholders to be HKD 946 million / HKD 1.063 billion, giving it a "Buy" rating.

Key Points from Xingzheng International:

2025 Mid-Year Performance Meets Expectations, Continuous Growth in Dividend per Share

The company's mid-year revenue for 2025 is HKD 10.316 billion, a year-on-year increase of 18.5%; gross profit is HKD 946 million, a year-on-year decrease of 1.8%; net profit attributable to shareholders is HKD 706 million, a year-on-year increase of 9.8%. The company maintains a steady growth dividend policy, with a mid-year dividend per share of HKD 0.19, a year-on-year increase of 26.7%. The company's mid-year performance meets expectations.

Three Core Businesses Contribute Major Revenue and Profit

The company's three core businesses—import of tobacco leaf products, export of tobacco leaf products, and cigarette export—contribute revenue of 81.4%, 11.2%, and 5.3% respectively, totaling 98.0%; gross profit contributions are 72.6%, 6.7%, and 15.0%, totaling 94.3%.

Import of Tobacco Leaf Products: The company's import revenue for tobacco leaf products in mid-2025 is HKD 8.399 billion, a year-on-year increase of 23.5%, with gross profit of HKD 687 million, a year-on-year decrease of 7.7%. The decline in gross profit is mainly due to the cost of tobacco leaves from CBT procurement rising faster than the sales price.

Export of Tobacco Leaf Products: This business has mid-2025 revenue of HKD 1.156 billion, a year-on-year increase of 25.9%, with gross profit of HKD 63.1 million, a year-on-year increase of 124.1%, mainly due to the company's active expansion into new markets and new customers, with both export volume and price increasing.

Cigarette Export Business Profitability Continues to Improve: As of mid-2025, the company's cigarette export revenue is HKD 552 million, a year-on-year increase of 0.8%, with gross profit of HKD 142 million, a year-on-year increase of 16.8%. The gross profit margin continues to improve, mainly due to the company's increased efforts in expanding self-operated channels, scaling up self-operated business, and continuously introducing new products.

Profitability Still Has Room for Improvement

The company's gross profit margin and net profit margin attributable to shareholders for mid-2025 are 9.2% and 6.8%, respectively. The company continues to optimize its product structure and business model. Except for the decline in gross profit margin for the import of tobacco leaf products, the gross profit margins of other businesses have all improved.

Risk Warning: Geopolitical risks, changes in industry policies, exchange rate fluctuation risks, and seasonal impacts on tobacco leaf planting