On Thursday, June 18, the Hong Kong-listed company “China Tobacco Hong Kong,” a state-owned enterprise monopolizing the tobacco industry in the mainland, predicted a significant decline in revenue and profit in the first half of 2026.
According to documents submitted to the Hong Kong Stock Exchange on Thursday evening, revenue for the period from January to June is expected to decrease by 25% to 30% year-on-year, with a net profit decline of 10% to 15%. This indicates that revenue is estimated to be around HK$7.22 billion to HK$7.73 billion, and net profit is expected to be HK$600 million to HK$635 million.
The company attributed the anticipated decline in revenue and profit to two main factors. One is the sluggish tobacco import business, impacted by factors such as “international trade relations and shipping schedules,” specifically pointing out a decrease in tobacco imports from the United States.
The other factor is the delayed shipment of rolled tobacco in the duty-free market within the country, leading to a decline in export business revenue.
This profit warning comes after “China Tobacco Hong Kong” achieved double-digit growth in revenue and profit in 2025.
According to the annual report disclosed by “China Tobacco Hong Kong” on April 23, 2026, the group’s revenue for 2025 reached HK$14.579 billion, a year-on-year increase of 11.5%; gross profit was HK$1.473 billion, up by 6.9%; and the company’s net profit attributable to equity holders was HK$980 million, a growth of 14.8% compared to the previous year.
China’s tobacco imports are strictly regulated by the Chinese Communist government. “China Tobacco Hong Kong,” designated by its state-owned parent company “China National Tobacco Corporation (CNTC),” is responsible for conducting this monopolistic business. All tobacco imported by this Hong Kong subsidiary is sold to CNTC at a predetermined profit margin, constrained by a long-term framework agreement.
According to a report by “Nikkei Asia,” based on the latest annual budget data from the Chinese Ministry of Finance, CNTC handed over profits worth 99.67 billion RMB to the Ministry in 2025. This amount represents about 28% of the total revenue collected by the central government from all 2,433 directly managed central enterprises and implies that CNTC’s net profit in 2025 was approximately 285 billion RMB.
Since 2021, land finances have been declining continuously alongside adjustments in the real estate market. In 2025, national government fund budget revenue decreased by 7% year-on-year, and local government fund budget revenue fell by 8.2%. Local state-owned land transfer revenue dropped from its peak of 8.7 trillion RMB in 2021 to 4.2 trillion RMB in 2025. In response to budget pressures from the weakened real estate industry and calls to increase stimulus spending, the Ministry of Finance raised the tax profit collection ratio for CNTC in 2026 from 25% to 35% in March.
Furthermore, historical observations suggest that each time the profit collection ratio is increased, central enterprises tend to raise their dividend rates. For instance, after the profit payment increase of 5 percentage points for central enterprises was confirmed in 2014, the average dividend payout ratio of listed central enterprise companies in 2015 rose to 12%. Therefore, the impact of the profit increase collection ratio adjustment in 2026 on the dividend payout ratio of listed companies remains to be seen and observed.