Under the verification of harm reduction & product power, the evolution of the new tobacco revolution has accelerated, and we are optimistic about the long-term penetration space of the industry. According to Euromonitor data, the market scale of HNB (heating without combustion) increased from US $5.55 billion in 2017 to US $26.23 billion in 2021, with a compound growth rate of 46.2%. From the perspective of products and technology, from the perspective of the composition of “one cigarette”, we discuss the technical iteration space and the formation mechanism of technical barriers of HNB products by constructing the product evaluation and analysis framework.
① from the perspective of industry structure deduction, international tobacco giants have made layout of HNB & atomized e-cigarette. At present, the global atomized e-cigarette has moved towards a centralized pattern; Under the barriers constructed by raw material attributes, product power and channels, we judge that HNB competition will eventually be performed among traditional tobacco giants.
② at present, HNB is still in the process of product & Technology iteration, and the approach to “real smoke” leads the direction of technology iteration. From the perspective of “one cigarette”, heating system, thin slice and essence are important variables for taste upgrading. The technology of HNB heating the contents of tobacco slices, the difference of aroma releasing substances and the corresponding technological composition of traditional cigarettes gave the HNB cigarette substrate an iterative development space. Taking the sheet as an example, the evaluation of homogenization and load capacity exceeds the cost factors, and the qualification certification further improves the entry barriers of supply chain manufacturers. Therefore, in the medium and long term, we are optimistic about the growth opportunities brought by excellent HNB substrate supply chain enterprises through rapid iteration to build product & service competitiveness.
3. Market measurement of smoking gear, HNB wafer and flavor Market: Based on a series of assumptions, we expect that after the HNB policy is released, penetration rate reaches 20%, and the HNB outlet / terminal retail scale is expected to reach 141/307 billion yuan. As the main content of cigarette heating, the HNB sheet is 5~8 times the amount of traditional lamellae, while the amount of HNB flavors is 10 times the amount of traditional tobacco flavor. It is estimated that the HNB slice / flavor market scale is expected to reach 242/48 billion when the HNB penetration rate is 20%.
The strength of policy control is a key variable affecting the slope of e-cigarette penetration rate curve in various countries. The strength of policy control depends on the positioning of e-cigarette products by governments, which is mainly based on the cognition / recognition of e-cigarette harm reduction, the cognition of youth attraction, the recognition that can effectively reduce the smoking rate of traditional tobacco and other factors. On this basis, relevant advertising, access registration process, packaging, taste, tax and other aspects shall be subject to corresponding restrictions. China’s current control of atomized e-cigarettes refers to the positioning of tobacco, and there is no clear policy for HNB products.
Investment advice
Nuggets HNB supply chain growth opportunities. Under the tide of global tobacco control and harm reduction, the continuous improvement of the penetration rate of new tobacco and cigarette sets is a long logic. It is suggested that investors seize the development opportunity of the rise of HNB track supply chain. At present, the electronic cigarette industry has entered the observation period before the landing of the policy. After the landing of the policy, the HNB and atomization will usher in a clearer growth logic. It is suggested that investors should pay close attention to the investment opportunities of FMCG cigarettes (wafers, flavors, mouth sticks) and hardware heating non burning cigarette subdivision supply chain links. It is suggested to pay attention to: Shenzhen Jinjia Group Co.Ltd(002191) (acquire high-quality targets, grasp the industry trend, look forward strategically, and constantly improve the layout of the whole industry chain of new tobacco), smore International (atomization barrier has been verified by the market, in-depth layout of HNB smoking sets, in-depth cooperation with China Tobacco), etc.
Risk tips
Uncertainty risk of new tobacco HNB policy liberalization; Risks of technical iteration; Risk that the promotion of new products is less than expected
