Event: on April 12, the State Administration of market supervision and administration and the National Standardization Administration approved the mandatory national standard of electronic cigarette and announced it to the public. The national standard of electronic cigarette will be implemented from October 1, 2022.
The national standard of electronic cigarette was officially issued to clarify the compulsory production standard of electronic cigarette in China. One month after the release of the second draft of the national standard issued by the tobacco bureau on March 11, the national standard of e-cigarette was officially approved. The national standard of electronic cigarette is a mandatory standard, and all Chinese electronic cigarette products must be produced in strict accordance with the national standard. The document clearly stipulates the additives, aerosols and product inspection methods of e-cigarette. In terms of taste, the ban on non tobacco flavor e-cigarettes in the second exposure draft was retained, and 101 permitted atomizing additives and the maximum amount of use were specified; The nicotine concentration of electronic smog compounds shall not be higher than 20mg / g, and the total amount of nicotine shall not be higher than 200mg; The cigarette rod should have the function of preventing accidental start and child safety lock. At present, most electronic cigarette products on the market do not have the function of child lock.
The management measures was implemented on May 1, and fruit flavored cigarettes are expected to be available for sale before October 1. The measures for the administration of e-cigarettes, implemented on May 1 this year, has standardized the production, sales, import and export of e-cigarettes. E-cigarette production and sales enterprises must apply for licenses. Listed products need to pass the technical inspection review and establish a sampling inspection system, and the sales need to circulate through the trading platform. We expect that after the formal implementation of the administrative measures, license applications for e-cigarette production, retail and other links will be launched one after another. In the short term, the e-cigarette trading platform will be launched, and the industry will enter a new era of supervision. We are optimistic that before the official implementation of the national standard on October 1, the channel inventory of fruit flavor tobacco and other non-national standard products can still be sold, which will help the market transition smoothly, and help enterprises further improve the formula of tobacco flavor products and improve the production and manufacturing process.
Investment suggestion: with the introduction of various regulatory documents of the industry, China’s e-cigarette industry has ended the disorderly development stage and officially entered a new era of standardized development with rules to follow, which is of great significance to the healthy and long-term development of the industry. With the rapid promotion of the policy, the clearance of unqualified products and production capacity will be accelerated to promote the concentration of market share. The short-term industry has experienced a period of policy running in. In the medium and long term, under the general trend of global new tobacco, the industry will usher in standardized and steady development. It is suggested to pay attention to the leading enterprises in the industry in terms of process technology, production scale, organization and management and customer cooperation, such as smore International (6969. HK) and Shenzhen Jinjia Group Co.Ltd(002191) ( Shenzhen Jinjia Group Co.Ltd(002191) . SZ) with significant first mover advantage and new-type tobacco full supply chain layout.
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.
