Core view
Weekly review of the sector: the new tobacco sector rose 2.47% this week, outperforming the Shanghai and Shenzhen 300 index and the China Securities 500 index by 4.61pct and 3.48pct respectively. In terms of individual stocks, Shanghai Shunho New Materials Technology Co.Ltd(002565) , Shandong Jincheng Pharmaceutical Group Co.Ltd(300233) , Zhuhai Rundu Pharmaceutical Co.Ltd(002923) and Zhuhai Rundu Pharmaceutical Co.Ltd(002923) rose the most this week, rising 14.84%, 11.45% and 7.81% respectively; Fogcore technology, Byd Company Limited(002594) electronics and Eve Energy Co.Ltd(300014) fell 17.99%, 10.10% and 7.37% respectively.
Zhou’s focus: Logic tobacco flavor products of Nippon tobacco have been authorized by FDA, becoming the second e-cigarette brand to obtain PMTA after VUSE. On March 24, several products of logic, an e-cigarette brand under JTI, were authorized by PMTA, including logicvapeleaf, logicpower and logicpro, becoming the second e-cigarette brand to obtain PMTA license from FDA after VUSE. Logic submitted PMTA applications for tobacco, menthol and multiple fruit flavors of logicpro, logicpower and vapeleaf products as early as August 19, 2019. At present, except that the tobacco flavor has passed PMTA, the fruit flavor products have received MDO and menthol flavor are still under review. In October 2021, FDA issued the PMTA license for electronic cigarette for the first time, approving the vusesolo equipment of rjreynolds (RJR) vapor company and two tobacco flavored cigarette bombs to be sold in the United States. FDA also said recently that it would speed up the review process.
Smore international and Heyuan group or logic passed the PMTA review. The logic e-cigarette products of Japan Tobacco (JTI) are developed and produced by two Chinese e-cigarette manufacturers, SIMORE international and Heyuan group. This time, it is closely related to the assistance of PMTA and the Chinese e-cigarette OEM enterprise of brand cooperation. The two companies are leading the industry in terms of software and hardware, quality system and personnel quality. In January 2020, the audit organization of FDA visited the site and conducted a comprehensive and in-depth audit and positive evaluation on the production process and quality control system of the two companies. Affected by the epidemic situation, FDA’s factory inspection team did not conduct field visits before issuing PMTA for logic, which indirectly represents that after the field visits in early 20 years, two enterprises of Smallworld and Heyuan have obtained FDA’s quality management recognition.
Investment suggestion: enterprises that take the lead in passing the head brand and core supply chain of PMTA are expected to give priority to benefiting from the development dividend of the industry. Logic has become the second e-cigarette brand approved by PMTA after VUSE, which is conducive to the improvement of the brand’s market share in the U.S. e-cigarette market. The core OEM enterprise of the brand is also expected to fully benefit from the growth of customer demand. The administrative measures for e-cigarettes to be officially implemented in China on May 1 encourage the export business development of e-cigarette manufacturing enterprises. In the future, enterprises with outstanding comprehensive advantages such as process technology, production scale and quality management are expected to fully benefit from the development of the global e-cigarette market. 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.
