Key investment points
Event: on April 12, 2022, the State Administration of market supervision and administration and the National Standardization Administration approved the mandatory national standard of electronic cigarette, which will be implemented from October 1, 2022. In October 2017, the national standard project of e-cigarette was approved. Since then, two rounds of exposure drafts have been issued on 2021 / 11 / 30 and 2022 / 3 / 11 to make mandatory specifications for e-cigarette sets, aerosols and other aspects.
Key contents: the content of the national standard of electronic cigarette is basically consistent with the second draft of the previous exposure draft. The national standard stipulates that: 1) the atomized substance should contain nicotine, should not induce minors, and should not make the characteristic flavor of the product show other flavors except tobacco; 2) Nicotine extracted from tobacco shall be used, and the purity shall not be less than 99% (mass fraction); 3) The electronic cigarette set and cigarette cartridge shall have a closed structure to prevent artificial filling without liquid leakage. The cigarette set shall have the function of preventing children from starting and the function of preventing accidental starting; 4) The temperature of atomization area shall not be higher than 350 ℃; 5) The concentration of nicotine in the atomized substance shall not be higher than 20mg / g, the total amount of nicotine shall not be higher than 200mg, and the release amount per mouth shall not be higher than 0.2mg; 6) A total of 101 sweeteners and sweeteners are included in the list.
Clarifying the detailed rules of e-cigarette standards will help standardize the long-term and healthy development of the industry. After the introduction of the national standard of e-cigarette, the production stage without national standard in the industry has ended, and there are standards for the production and manufacturing of e-cigarette in China. The impact of short-term policy adjustment is inevitable, but we emphasize that: 1) the richness and experience of tobacco taste will continue to improve. Enterprises with strong R & D strength can still produce more different tobacco flavors through 101 additives. Compared with the United States, we believe that the impact of the taste ban on the demand side may be digested within 1-2 years. According to the CDC data of the United States, before and after the introduction of the taste ban in early 2020, the overall monthly sales of e-cigarettes in the United States in February 2020 were 14.8 million, a decrease of nearly 33% compared with 22 million in August 2019. With the subsequent monthly sales of e-cigarettes showing a restorative growth, the monthly sales of e-cigarettes in the United States had recovered to 21.4 million by December 2021; 2) The impact of restricting the source and dosage of nicotine is relatively limited. In accordance with the TDP standard (20mg / ml) issued by the European Union in 2014, the European e-cigarette industry still maintains steady growth under this standard. We believe that the impact of nicotine content restriction on the growth of the industry is limited; 3) Under the attribute of harm reduction, the medium and long-term penetration rate of e-cigarettes is expected to be further improved. With the recognition of harm reduction and replacement of e-cigarettes and the continuous upgrading of product quality, the replacement market brought by the transformation of Chinese traditional smokers is still relatively broad in the long run. At the same time, strict requirements on technical standards raise the entry threshold of the industry, improve the industry concentration and accelerate the liquidation of small and medium-sized enterprises, so that the industry continues to move towards standardized development.
Extend the transition period, ensure the smooth switching of the industry, and implement the follow-up supporting regulatory policies in an orderly manner. On March 12, 2022, the state tobacco administration issued the measures for the administration of e-cigarettes, which will be implemented from May 1, 2022. According to the implementation time of the national standard of electronic cigarette on October 1, the transition period of policy implementation has been extended to a certain extent compared with May 1 expected by the industry. In addition, Huizhou and Xiamen began the pilot work of e-cigarette supervision on April 1, 2022; On April 2, 2022, the State Tobacco Monopoly Administration issued four documents, including several policies and measures on regulating the development of e-cigarette industry (for Trial Implementation), as well as matters related to the application for production, wholesale and retail licenses by e-cigarette enterprises. The implementation of the national standard for e-cigarettes further implemented the issuance conditions such as production licenses, and promoted the orderly implementation of subsequent supporting regulatory policies. During the transition period, the e-cigarette supervision and pilot work will be carried out smoothly, which is expected to ensure the smooth transformation of the e-cigarette industry.
Investment suggestion: after the implementation of the national standard, the industry will usher in legal and standardized development. The short-term market scale may be disturbed by the implementation of policies, but the medium and long-term penetration is expected to continue to increase. Recommend [SIMORE international] with outstanding valuation cost performance after correction; It is suggested to pay attention to [fog core technology] whose advantages in brand and user volume are expected to continue; [ Shenzhen Jinjia Group Co.Ltd(002191) ] with extensive industrial chain layout.
Risk tips: uncertainty of industrial policies, change of PMTA audit standards, intensification of industrial competition, etc.
