Core view
Event: on April 13, the State Administration of market supervision and administration, the state tobacco monopoly administration and other relevant departments answered relevant questions on the measures for the administration of electronic cigarettes and the national standard of electronic cigarettes.
The answer document focuses on the following market concerns:
1) clarify the regulatory object and the prohibition of zero sales in China. Make it clear that electronic cigarettes, aerosols, nicotine for electronic cigarettes, electronic cigarette products without nicotine and other new tobacco products are included in the supervision scope. According to previous policy requirements, electronic smog chemicals should contain nicotine, and China will ban the sale of zero nicotine herbal electronic cigarettes.
2) make it clear that the policy transition period is before September 30, 2022. During the transition period, the existing e-cigarette production and operation entities before November 10, 2021 can continue to carry out production and operation activities, but can not set up new enterprises, expand production capacity, or add e-cigarette retail outlets. During the transition period, the fruit flavor cigarette inventory can still be produced and sold. At the same time, the relevant subjects of the industry should grasp the time window, speed up the digestion of inventory, actively improve the product compliance design, apply for relevant licenses, submit product testing, etc. in accordance with the requirements of laws and regulations, and ensure the smooth transition of e-cigarette production and sales and other business activities after the relevant laws and regulations come into force.
3) specify the way and time of license application. Production side: from May 5, 2022, the existing production enterprises before November 10, 2021 can apply for a license to the local provincial tobacco monopoly administrative department. After the transition period, the production enterprises that meet the laws and regulations can apply. Sales side: no new wholesale license; Existing retail entities before November 10, 2021 can submit retail license applications to the competent authorities from June 1, 2022, and retail entities that meet the laws and regulations can apply after the end of the transition period.
4) the e-cigarette trading management platform is expected to be launched on June 15, 2022, and the production, wholesale and retail entities that have obtained the license related to tobacco monopoly will gradually trade on the platform.
5) in the future, e-cigarettes will establish a sound supporting policy system. The follow-up regulatory documents will further refine the relevant supporting policies and rules on license management, technical review, product traceability and spot check. The tax supporting policies for e-cigarettes need to be further introduced.
Investment suggestion: the policy answer document gives clear answers to the focus issues concerned by the market one by one, shows the determination of strict supervision, and ensures the effective implementation of market supervision. At the same time, the policy clearly gives a transition period of more than five months to ensure the smooth transition of the market, which shows the positive attitude of the regulatory authorities towards maintaining market order and promoting the benign and healthy development of the market. The further improvement of relevant supporting rules will be beneficial to the standardization and long-term development of the industry. China’s e-cigarette industry has officially entered a new era of standardized development with rules to follow. The short-term policy window period will help the smooth transition of all links of the industry. The clearing of long-term unqualified products and production capacity will promote the concentration of market share and benefit the leading enterprises in all links such as production and brand. It is recommended to pay attention to smore International (6969. HK) and Shenzhen Jinjia Group Co.Ltd(002191) ( Shenzhen Jinjia Group Co.Ltd(002191) . SZ).
Risk warning: the sales of new products are less than expected; The Sino US trade war intensified; The risk of intensified industry competition; Macroeconomic downside risks.
