Focus this week: Japan Tobacco (JTI) released its 2021 annual report: in 2021, it achieved a total revenue of 2.32 trillion yen (about US $20.12 billion), a year-on-year increase of 11.1%; The net profit was 340.2 billion yen (about US $2.945 billion), a year-on-year increase of 9%.
21q4 Japan’s market scale of harm reduction products accounts for more than 30% of the total amount of the tobacco industry, and the revenue continues to grow
In 2021, the company achieved a total revenue of 59.8 billion yen (about 517 million US dollars) in the harm reduction products sector, with a year-on-year increase of 7.2%, mainly driven by the growth of sales of heating non combustion products; The sales volume of heating non combustion smoke bombs was 4.6 billion, with a year-on-year increase of 17.9%, and the market share in Japan’s harm reduction products was 10.3%. In 2021, the overall market scale of harm reduction products in Japan accounted for 30% of the total volume of the tobacco industry, and the total sales volume of heated non combustible cigarette bombs was 45.1 billion, with a year-on-year increase of 12.2%. In 2021q4, the company achieved revenue of 13.6 billion yen (about 118 million US dollars), a year-on-year increase of 2.3%, and the sales volume of heating non combustion smoke bombs was 1.3 billion, a year-on-year increase of 30%; The overall market scale of harm reduction products in Japan accounts for about 31.7% of the total tobacco industry.
In terms of traditional tobacco, the total decline of cigarette sales in Japan in 2021 was 8.4%, mainly due to the natural downward trend of categories and the growth of market share of harm reducing products. In terms of the company’s products, in 2021, its cigarette sales decreased by 9.5% year-on-year, and its market share decreased by 0.7pct to 59.1% year-on-year, mainly due to consumers turning to harm reducing products and fierce price competition.
Ploomx was successfully launched and aims to achieve a market share of 15% in major heating non combustion products in 2027
The company achieved strong performance growth in 2021, increased market share in most markets, and achieved record sales in the international tobacco business, mainly benefiting from its consumer centered strategy and rich brand portfolio. Last year, the company successfully launched a new heating non combustion equipment ploomx in Japan, integrated the tobacco business and implemented a new operation mode, aiming to achieve medium and high single digit growth in operating profit adjusted by constant exchange rate in the future. In terms of future development strategy, the company will focus on expanding its influence in the category of harm reduction products, in which it will give priority to investing in heating non combustion products. The goal is to achieve a market share of 15% in the market of main heating non combustion products in 2027 and achieve a balance of revenue and expenditure in the sector of harm reduction products.
We believe that Japan is the world’s largest market for heating non combustion products, which has broad development space. At the same time, the company focuses on the layout in the field of harm reduction products. Ploomx will also be launched all over the world, and the sales volume of heating non combustion equipment is expected to continue to grow. As a manufacturer of electronic atomization components for heating non combustion products, smore international is expected to continue to make profits with its technical advantages.
Investment proposal 1) HNB industry chain: the key recommendation is – Shenzhen Jinjia Group Co.Ltd(002191) (China Tobacco standard leader, the only strategic cooperative private enterprise with Yunnan tobacco) [joint coverage with light industry team], Warburg International (tobacco flavor spices, overseas business steadily expanding) [joint coverage with food and beverage team]; It is suggested to pay attention to: Anhui Genuine New Materials Co.Ltd(603429) , Shanghai Shunho New Materials Technology Co.Ltd(002565) , Shantou Dongfeng Printing Co.Ltd(601515) [light industry team coverage], China Tobacco Hong Kong and Bolton, China. 2) Atomization industry chain: key recommendation – smore International (leading global atomization equipment manufacturer), followed by fog core technology (leading Chinese atomization brand) and Shenzhen Aisidi Co.Ltd(002416) (leading Chinese atomization channel). Risk tip: the risk of new tobacco policy changes, the risk of sales / enterprise development falling short of expectations and intensified market competition.
