Key investment points
Logic has been approved as PMTA after VUSE, and the signal of big brand priority has been clear
On March 25, 2022, FDA authorized the sale of two atomized electronic cigarettes (logic power and logic Pro), one HNB product (logic vapeleaf) and five supplementary products produced by logic under Japan Tobacco International (JTI). At the same time, FDA also rejected the application of logic flavored electronic cigarettes, and the mint flavor is still under review. We believe that this is another product audit of tobacco giant since vusesolo first audited PMTA in October 2021. It is an endorsement of major brands, which is conducive to subsequent sales and share improvement.
Atomized smoke: Logic pro and logic power are not popular SKUs. FDA mainly asks for directions. It hopes to observe the market reaction by authorizing PMTA, a relatively unpopular product under major brands, so as to improve the follow-up standards.
HNB: logic vapeleaf has become the second HNB product to win PMTA following iqos, which is actually the same product as ploomtech (the third largest HNB product in the world, with low technology patent risk and good product quality & market response). Due to the blocked sales of iqos in the United States and vapeleaf is expected to take the lead in opening the HNB market in the United States, it is beneficial to the order elasticity of ploom tech.
The head product audit may be accelerated to promote the optimization of the competition pattern in the US market
Overall, the audit results are in line with our previous judgment: 1) products submitted to PMTA earlier will enter the audit process faster. 2) PMTA audit is more cautious, first audit products with small market share and continuously improve the system. 3) Leading brands with complete information, sufficient preparation and higher market attention will take the lead in passing the relevant FDA audit. At present, the PMTA audit progress has reached 99%, and the products with high market share may enter the audit cycle, which will promote the continuous optimization of the competition pattern of the U.S. e-cigarette market.
Investment advice
At present, the review progress of PMTA has reached 99%. The follow-up head brand products are expected to be approved one after another, the industry pattern is expected to accelerate the concentration, and the core brands bound by SIMORE international are expected to benefit. Under the catalysis of market pessimism, the valuation of the company is at the bottom. Considering that the growth of overseas business in 22 years is still good (we expect to contribute about 4.5 billion profits), the expectation for Chinese business in the current market value is very low. As an industry leading company with the strongest technical strength, the current value is fully highlighted. In addition, the progress of overseas PMTA is also expected to form a reference for China’s new tobacco policy. It is optimistic about the subject of China Tobacco Shenzhen Jinjia Group Co.Ltd(002191) , which is expected to benefit first after the opening of the Chinese market.
Risk tips
The iteration of new products is less than expected, the sales volume of key customers is less than expected, and the regulatory policy is stricter.
