Key investment points
Event 1: on March 25, 2022, the FDA announced that it authorized the launch of eight products of logic, a Japanese tobacco e-cigarette brand, including logicvapeleaf (using ploomtech brand outside the United States), logicpower and logicpro (including electronic atomizer). The products approved this time are all tobacco flavor, and some products (including menthol flavor) are still in the process of approval.
Event 2: in the “several measures of Bao’an District on promoting the high-quality development of advanced manufacturing industry and modern service industry” issued on March 20, 2022, Shenzhen Bao’an District government proposed to support the development of regional characteristic and advantageous industries, encourage the agglomeration and development of characteristic and advantageous industrial enterprises such as new electronic atomization equipment, reward the implementation subjects of the construction of electronic atomization equipment professional park, and reward the characteristic and advantageous industrial enterprises such as new electronic atomization equipment, Reward according to the increment of added value.
The comprehensive strength of SIMORE international and Heyuan technology has been recognized by FDA, and other products are more likely to pass the audit. PMTA audit includes factory inspection, and the manufacturers of the approved products include SIMORE international and Heyuan technology, indicating that the comprehensive strength of the above two manufacturers has been recognized by FDA. In addition, all the approved products submitted applications in August 2019, and FDA conducted factory inspection in January 2020. Affected by covid-19 epidemic, FDA’s factory inspection in China was suspended after January 2020, and other Chinese manufacturers have not passed FDA’s factory inspection. Therefore, we judge that other products of SIMORE and Heyuan technology are more likely to be approved in the short term, while the products of other manufacturers still need to wait for a long time.
The PMTA audit standard is high, and the industry is expected to accelerate the concentration of head brands. As of March 2022, 99% of the 256.7 million e-cigarette listing applications have been accepted, of which only 8 applications of Japan Tobacco and 3 applications of Renault tobacco have obtained listing permission. More than 100 million applications (involving more than 260 brands) have been given the review result of “not listing” in the review stage, and the rest have been rejected in the preliminary review stage. At present, all the 11 applications passed are tobacco flavor products, and some menthol products are still under review. The audit standard of PMTA in the United States is high, and the market share is expected to accelerate the concentration of head brands.
China and the United States accelerate the standardization of e-cigarette industry and are optimistic about the healthy development of China’s e-cigarette manufacturing industry. The approval of PMTA in the United States continues to advance, but the products that have passed PMTA are not mainstream and best-selling products in the U.S. market, of which three products of logic were listed in the United States in 2017; Vusesolo is a cotton core product. Mainstream products, such as vusealto series manufactured by SIMORE, are still under review, and more subsequent products are expected to be approved for listing. In terms of China’s policies, on March 12, 2022, the China tobacco administration issued the measures for the administration of e-cigarettes, which will be officially implemented on May 1, 2022. On March 25, 2022, China’s national standard for electronic cigarettes entered the “approval” stage again and is expected to be released and implemented in the near future. The United States is the world’s largest consumer of e-cigarettes, while China is the global e-cigarette manufacturing center. According to the white paper on e-cigarette Industry issued by China e-cigarette chamber of Commerce, there were more than 1500 e-cigarette manufacturing and brand enterprises in China in 2021, with an export scale of 138.3 billion yuan, and exports to the United States accounted for more than 50%. China and the United States have accelerated the supervision of the e-cigarette industry and the industry continues to move towards standardized development, which is conducive to the medium and long-term healthy development of China’s e-cigarette manufacturing enterprises. Bao’an District of Shenzhen is a cluster of e-cigarette manufacturing enterprises in China. This policy issued by Bao’an District encourages the development of electronic atomization equipment enterprises, which plays a positive role in enabling e-cigarette manufacturers to smoothly go through the policy running in period and embark on the road of sustainable development.
Investment suggestion: the industry will be legalized and standardized. The short-term market scale may be disturbed by the implementation of policies, but the medium and long-term penetration rate is expected to continue to increase. [Moore’s recommended price / performance correction]; It is suggested to pay attention to [ Shenzhen Jinjia Group Co.Ltd(002191) ] with a wide range of industrial chain layout; Fog core technology, which is expected to continue its advantages in brand and user volume.
Risk tips: uncertainty of industrial policies, change of PMTA audit standards, intensification of industrial competition, etc
