Weekly review of the sector: the new tobacco sector fell – 4.95% this week, underperforming the CSI 300 index by 0.73pct and 0.1pct respectively. In terms of individual stocks, only Shanghai Shunho New Materials Technology Co.Ltd(002565) rose slightly this week, or 0.64%; Smore international, China Bolton, Xiamen Intretech Inc(002925) , and fogcore technology all fell by more than 10%.
Zhou’s concerns: 1) on March 11, the State Tobacco Monopoly Administration issued the measures for the administration of e-cigarettes, which will take effect from May 1, 2022, and publicly solicited opinions on the national standard of e-cigarettes (the second draft for comments), requiring written opinions to be fed back to the project team before March 17. 2) Fog core technology announced its financial report for 2021. On the evening of March 11, fog core technology, the parent company of electronic cigarette brand Yueke, announced the unaudited financial statements for the fourth quarter and the whole year of 2021. According to the financial report, the annual revenue of fogcore technology in 2021 was 8.52 billion yuan, a year-on-year increase of 123.1%, and the adjusted net profit was 2.25 billion yuan, a year-on-year increase of 181.1%; In Q4 of the 21st year, the company realized a revenue of 1.9 billion yuan, a year-on-year increase of 17.7%, and the adjusted net profit was 540 million yuan, a year-on-year increase of 27.9%. The company’s performance growth is good, and the leading position of “Yueke” brand is stable. The revenue growth in 21 years mainly comes from the increase of sales revenue of offline distributors and the expansion of the company’s distribution and retail network.
Investment suggestions: 1) we believe that the management measures ban flavored cigarettes, return e-cigarettes to the essence of tobacco, focus on the harm reduction effect of new tobacco, and welcome the orderly and standardized development of the industry. Referring to the regulation and industry development trend of the U.S. e-cigarette market, the size of the U.S. e-cigarette market has not declined significantly after the taste ban. In 2020, the market size decreased slightly by 3% year-on-year, and it is expected to return to the fast lane of development after the transition period of policies.
2) it is expected that after the completion of the second consultation of the national standard, after review, approval and release, it will also be officially implemented in the near future, so as to cooperate with the formal implementation of the technical audit provisions such as product listing inspection and random inspection in the management measures from May 1.
3) the long-term development of e-cigarettes in China will be based on the product characteristics of new tobacco, such as reducing harm and helping to quit smoking, and will develop orderly and steadily under supervision. With the active promotion of policies, the clearing of unqualified products and production capacity will be accelerated to promote the concentration of market share. The leading enterprises operating in compliance with the industry are expected to further increase the market share. It is suggested to pay attention to the global atomization OEM leader smore International (6969. HK) with leading technical strength, and the Shenzhen Jinjia Group Co.Ltd(002191) ( Shenzhen Jinjia Group Co.Ltd(002191) . SZ) with the layout of the new tobacco whole industry chain and close cooperation with China tobacco.
Risk warning: industry regulatory policies exceed expectations; The market demand is less than expected; Intensified market competition; Technical iteration and update; Price fluctuation of raw materials; Repeated outbreaks outside China have impacted channel sales; Macroeconomic pressure
