Core view
Weekly focus: 1) fog core technology releases the first quarterly report of 2022. In Q1 2022, the company realized an operating revenue of 1.714 billion yuan, a year-on-year decrease of 28.52%; The adjusted net profit was 362 million yuan, down 40.6% from 610 million yuan in the same period last year; The gross profit margin of 22q1 was 38.3%, down from the gross profit level of about 46% in the same period last year. The decline of 22q1 revenue was mainly affected by the great changes in the external environment and the shutdown of the company’s Shenzhen plant caused by the closure of the epidemic, which put pressure on the company’s production and shipment. 2) The number of e-cigarette retail licenses in China has been planned to be 48740. As of May 20, 2022, the provincial tobacco units in 31 provinces, municipalities directly under the central government, autonomous regions and separately listed cities have announced the number of e-cigarette retail licenses in their respective regions, with a total planned number of 48740. Jiangsu ranked first with 5057 licenses, while Guangdong (except Shenzhen) and Henan ranked second and third with 4036 and 3532 licenses respectively.
Weekly review of the sector: the new tobacco sector rose 5.58% this week, outperforming the Shanghai and Shenzhen 300 index and the China Securities 500 index by 3.34pct and 3.29pct respectively. In terms of individual stocks, Huabao Flavours & Fragrances Co.Ltd(300741) , Zhuhai Rundu Pharmaceutical Co.Ltd(002923) , and Smallworld rose 17.77%, 11.12% and 10.98% respectively this week; Fog core technology and China Bolton fell 3.61% and 2.71% respectively.
Investment suggestion: with the release of China’s e-cigarette retail license planning and the acceptance of production licenses, China’s e-cigarette supervision is carried out in an orderly manner. It is expected that the electronic trading platform will be officially launched for testing on June 15, and the market will operate smoothly in the transition period. It is expected that after the national standard comes into force in October this year, the market will usher in a sustained and sound development. E-cigarette is based on the harm reduction effect, and the demand development trend of the market is clear in the long run. The supervision will benefit the advantageous enterprises in various industrial links, increase their share, and encourage industrial technological innovation and digital development. In the future, the leading enterprises will have broad development space in China and overseas markets. With the increase of R & D investment and product iterative upgrading, it will further consolidate the competitive barriers of enterprises and improve their profitability. It is suggested to pay attention to it.
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.
