Focus this week: fog core technology released the quarterly report of 2022q1. In 2022q1, the company achieved a sales revenue of 1.715 billion yuan, a year-on-year decrease of 28.5%, and a non GAAP net profit of 362 million yuan, a year-on-year decrease of 40.7%.
Affected by the Shenzhen epidemic, Q1’s revenue declined. The company adjusted its business strategy in time to deal with regulatory changes. In 2022q1, the company achieved a sales revenue of 1.715 billion yuan, a year-on-year decrease of 28.5%, mainly due to the impact of the Shenzhen epidemic on the company’s factory production and product shipments; The gross profit margin was 38.3%, a year-on-year decrease of 7.7pct, mainly due to the change of the company’s product portfolio and the impact of supervision, which slowed down the inventory turnover; The net profit of non GAAP was 362 million yuan, a year-on-year decrease of 40.7%. In terms of cash flow, the company has sufficient cash reserves. As of 2022q1, the company has cash and cash equivalents, restricted cash, short-term bank deposits, short-term investments and long-term bank deposits totaling 14.95 billion yuan, which is conducive to the company’s flexible response to external uncertainty and timely adjustment of business strategy.
Attach great importance to R & D investment, focus on product innovation and improve operation efficiency
In 2022q1, the company continues to focus on its core strategy to maintain its leading position in the industry and prepare for the expected regulatory changes. With the implementation of the new regulatory framework and the introduction of specific rules, the company is actively adapting to the new market environment, applying for relevant licenses, and launching market leading products that meet national standards and user needs with leading R & D capabilities. In 2022q1, the company invested 24 million yuan in R & D. In the future, the company will continue to focus on product innovation, optimize the cost structure and improve the operation efficiency. While consolidating the basic market, the company will seize the potential growth opportunities in time. The State Tobacco Monopoly Administration issued the measures for the administration of e-cigarettes to supervise the implementation of e-cigarettes!
The measures for the administration of electronic cigarettes issued by the state tobacco monopoly administration shall go into effect as of May 1, 2022,
We believe that:
\u3000\u30001. E-cigarette Supervision: since the release of the management measures (Exposure Draft) in December last year, the rapid implementation of supervision shows the country’s determination to accelerate the standardized development of atomized e-cigarette industry.
\u3000\u30002. The entry threshold of the production end has been greatly improved: the production end (OEM, brand, atomization, nicotine enterprises, etc.) must be approved by the competent department of tobacco monopoly administration under the State Council. This supervision method will benefit China’s compliant upstream and downstream enterprises. The “small, scattered and poor” enterprises will gradually withdraw from the market, and the industry concentration rate will continue to increase in the future!
\u3000\u30003. Cancel the exclusive store at the sales end and turn to the collection store! Referring to the traditional cigarette license management mode, it is sold wholesale through the national unified e-cigarette trading management platform. This will further curb and crack down on China’s existing illegal sales behaviors such as general distribution, wechat merchants, collusion and disorderly prices, which is conducive to the healthy development of formal brands, products and channels. At the same time, the Administrative Measures stipulate that retail enterprises or individuals shall not exclusively operate e-cigarette products sold on the market, and retail stores will operate and sell multi brand products in the future.
Investment suggestions: 1) atomization industry chain: key recommendation – smore International (leading global atomization equipment manufacturer); Suggestion: fog core technology. 2) Tobacco supply chain: it is suggested to pay attention to: China Tobacco Hong Kong, Shenzhen Jinjia Group Co.Ltd(002191) , Huabao international, Anhui Genuine New Materials Co.Ltd(603429) , Shanghai Shunho New Materials Technology Co.Ltd(002565) , Shantou Dongfeng Printing Co.Ltd(601515) , China Bolton.
Risk tip: the risk of new tobacco policy changes, the risk of sales / enterprise development falling short of expectations and intensified market competition.
