Report guide
On March 11, the State Tobacco Monopoly Administration issued the national standard for e-cigarettes (second draft for comments) and the measures for the administration of e-cigarettes, which were adjusted compared with the version in early December, and defined the implementation time point. It is expected that the e-cigarette industry standard will usher in substantive progress.
Key investment points
Important changes in the new national standard + management measures focus on the protection of minors. Important changes in the national standard of electronic cigarette (second exposure draft) compared with the first edition:
(1) the taste design added that “the characteristic flavor of the product shall not show other flavors except tobacco”;
(2) the electronic cigarette set shall have the function of preventing children from starting and the protection function of preventing accidental starting, i.e. child lock;
(3) 122 additives reduced to 101;
(4) the deadline for soliciting opinions is March 17. The measures for the administration of electronic cigarettes specify that they will be implemented from May 1 (therefore, the national standard is expected to be officially issued before 5.1). Important changes:
(1) the taste requirements are the same as the national standard of electronic cigarette; (2) New article 6 “prohibit primary and secondary school students from smoking electronic cigarettes”;
(3) with regard to the printing of electronic cigarette trademarks, the first edition stipulates that only “designated enterprises” can print, and the restriction is deleted in the new edition;
(4) the addition of “no exclusive operation of electronic cigarette products for sale on the market” means that the collection store is the future direction and the exclusive store is facing rectification.
The short-term demand of the Chinese market has been suppressed, but the harm reduction attribute is expected to still ensure the improvement of long-term penetration. From the changes of the new version of the national standard and management measures, we believe that:
(1) the biggest change is in taste, which will suppress China’s demand in the short term, but we need to pay attention to the bottom logic of the long-term penetration of e-cigarettes, which is still to reduce harm, and the original intention of the country is to protect minors from harm.
(2) referring to the United States, the ban on flavored tobacco came into effect in January 20, and the taste of tobacco + Menthol was retained. After three quarters of decline and adjustment, 20q4 stabilized and 21q1 rebounded.
(3) among the reserved additives are mint, lemon, coffee and other flavoring agents, which does not rule out the development of mixed flavor dominated by tobacco flavor in the future.
Investment suggestion: pay attention to the long-term value of high-quality targets in the industrial chain. After the boots are landed, the bottom signal is obvious. Under more strict standards and norms, the rest is the king, and the brand leaders with strong technical strength still deserve attention. The current market value of SIMORE international has dropped to less than 100 billion yuan. Considering the good growth of overseas business this year and the expected contribution of 4-4.5 billion profits, the Chinese part of the market value has been cleared to the bottom, and the company attaches importance to the long-term value of the company.
At the same time, the high-quality target Shenzhen Jinjia Group Co.Ltd(002191) of China tobacco industry chain deserves special attention. The main business of cigarette label + color box provides a high safety margin, successively acquires high-quality assets in the upstream and downstream of the e-cigarette industry, and improves the integrated layout. China focuses on HNB & low-temperature herbal medicine, and overseas focuses on atomized e-cigarette. The forward-looking layout is expected to benefit first!
Risk tips
The strength of policy control exceeded expectations and the industry competition intensified.
