The future market of electronic cigarette depends on the policy evolution

The future market of electronic cigarette depends on the policy evolution The recently released Blue Book on the Export of Electronic Cigarette Industry in 2022 (hereinafter referred to as the "Blue Book") shows that in 2021, the export scale of China's electronic cigarettes will reach 138.3 billion yuan, an increase of 180% year on year, far exceeding the total export volume of goods. It is estimated that the total export volume of electronic cigarettes in 2022 will reach 186.7 billion yuan, an increase of 35%. Among the more than 1500 domestic e-cigarette enterprises, the number of export-oriented enterprises has exceeded 70%. After the negative policy is exhausted, the stock price of e-cigarette companies may face a reversal. The performance of major companies continued to decline. In recent years, many enterprises focused on the development of the sea The recently released Blue Book on the Export of Electronic Cigarette Industry in 2022 (hereinafter referred to as the "Blue Book") shows that in 2021, the export scale of China's electronic cigarettes will reach 138.3 billion yuan, an increase of 180% year on year, far exceeding the total export volume of goods. It is estimated that the total export volume of electronic cigarettes in 2022 will reach 186.7 billion yuan, an increase of 35%. Among the more than 1500 domestic e-cigarette enterprises, the number of export-oriented enterprises has exceeded 70%. After the negative policy is exhausted, the stock price of e-cigarette companies may face a reversal. Performance of major companies continued to decline In recent years, many enterprises have focused their development on overseas markets, but the growing overseas markets are still unable to reverse the current decline in performance. On August 24, Smaller International, the leader of electronic cigarette OEM, disclosed its business performance in the first half of 2022. The financial report shows that Simore International's operating revenue in the first half of 2022 will be 5.653 billion yuan, a year-on-year decrease of 18.7%; The adjusted net profit was 1.436 billion yuan, down 51.7% year on year. Simore International said that the main reasons for the decline of net profit in the first half of the year include the slowdown of corporate customer sales, the decline of gross profit margin and the growth of sales, management and R&D expenses. The financial report shows that in the first half of 2022, the revenue from sales to corporate customers of Simore International will be 5.093 billion yuan, a decrease of 21.6% over the same period of last year; Gross profit margin decreased from 54.9% in the same period of last year to 47.9% in the reporting period; At the same time, the R&D investment of Simore International was 604 million yuan, up 156% over the same period of last year. The decline in sales, gross profit margin and the increase in R&D investment led to a sharp decline in the net profit of Smaller International. Compared with Simore International, the performance of another electronic cigarette company is relatively stable. In the first half of 2022, Burton China will achieve an income of 1.199 billion yuan, an increase of 10.86% year on year; The profit attributable to the owners of the Company was 96.31 million yuan, a year-on-year decrease of 6.7%. In the first quarter of 2022, the net revenue of China's leading electronic cigarette brand Foxcore Technology was 1.71 billion yuan, a year-on-year decrease of 28.5%; Under non US GAAP, the adjusted net profit in the first quarter was 360 million yuan, compared with 611 million yuan in the same period last year. Judging from the latest disclosed performance, the major electronic cigarette companies still failed to achieve the reversal of performance and are still in decline. Overseas market is worth looking forward to Under the tightening domestic policies, exporting overseas has become an important development strategy for many e-cigarette enterprises. The Blue Book shows that at present, there are more than 1500 electronic cigarette manufacturing and brand enterprises in China, of which more than 70% mainly export their products overseas; It is estimated that the total export of electronic cigarettes will reach 186.7 billion yuan in 2022, with an expected growth rate of 35%. The export overseas market has become the most important growth point for electronic cigarette enterprises. In the export market, the most important countries and regions are the United States, the European Union, Russia and the United Kingdom. In 2021, China's total export of electronic cigarettes will be 138.3 billion yuan, of which 53% will be exported to the United States, while the export of European Union, Russia and the United Kingdom will account for 15%, 9% and 7% respectively. With the promotion of electronic cigarettes, the penetration of electronic cigarettes in the European Union, the United Kingdom and other regions is expected to further deepen. The Blue Book shows that the global e-cigarette market size will exceed 108 billion US dollars in 2022, and it is estimated that the overseas e-cigarette market size will maintain a growth rate of 35% in 2022. From a global perspective, the market of electronic cigarettes is huge and has maintained a rapid growth. The export of domestic electronic cigarettes is also growing rapidly. The data shows that in 2021, the export of China's electronic cigarette industry will be about 138.3 billion yuan, with a year-on-year growth of 180%; It is expected that this export scale will continue to grow, and the export volume will reach 340.2 billion yuan by 2024. The rapid growth of global market and domestic export may become the most important growth point for domestic electronic cigarette enterprises in the future. Huge market space in China The number of smokers in China is about 350 million. Over the years, China's tobacco industry has maintained a number of "world firsts": the first in tobacco planting area, the first in tobacco purchase, the first in cigarette production, the first in cigarette consumption, the first in the world in the number of smokers, and the first in tobacco profits and taxes. As a large tobacco country, China's electronic cigarettes are relatively small in scale, but growing rapidly. Data shows that in 2021, China's retail sales of electronic cigarettes will be about 19.7 billion yuan, up 36% year on year. The Blue Book of the Electronic Cigarette Industry in 2021 shows that, by the end of 2021, there are more than 1500 electronic cigarette manufacturing and brand related enterprises in China, including more than 1200 manufacturers, more than 200 electronic cigarette brand enterprises and about 120 cigarette oil enterprises. There are nearly 190000 electronic cigarette retail formats in China, including 138000 authorized stores, 47000 exclusive stores and 5000-7000 collection stores. Among them, Chengdu has the largest number of e-cigarette retail stores in China, followed by Beijing, Shanghai, Shenzhen and Chongqing. More than 95% of the world's electronic cigarette production and products come from China, 70% of China comes from Shenzhen, and more than 95% of Shenzhen comes from Bao'an. China is gradually changing from the world's largest manufacturer of e-cigarettes to the world's largest exporter of e-cigarettes. China is not only a big tobacco country, but also a big manufacturer of electronic cigarettes. However, from the perspective of penetration rate, China is far from other developed countries. Smart Research Consulting data shows that in 2021, the market penetration rate of electronic cigarette in the United States will be 38%, that in Japan will be 30.3%, and that in the United Kingdom will be 20.9%. Compared with these countries, China's electronic cigarette market penetration rate is only 1.5%. From the perspective of penetration rate, China's electronic cigarette is still in its early stage. With the increase of penetration rate in the future, the Chinese market has huge room for growth. Can the Electronic Cigarette Company Welcome the New Machine For many years, the policy level has been a major factor determining the development of e-cigarettes, but the attitudes of countries towards e-cigarettes at the policy level are different. In 2016, the US FDA (Food and Drug Administration) issued a statement saying that electronic cigarettes belong to tobacco products, which means that electronic cigarettes in the US market will be subject to stricter supervision in production, sales, product promotion and other aspects like conventional tobacco. Electronic cigarettes exported to the United States need to obtain FDA certification. At the same time, FDA requires all retailers not to sell e-cigarettes or similar products to customers under the age of 18, and customers need to show age certificates when purchasing. In January 2020, the US Food and Drug Administration (FDA) officially issued a new policy on electronic cigarettes in the United States, which prohibits the use of most fruit and mint flavored electronic aerosol products to curb the surge in the use of young people. In terms of electronic cigarette policy, the United States tends to have limited permission, but the policies of each state are also different. In the UK market, the policy level is more open. On October 29, 2021, the British government official website released information that the British National Health Service (NHS) will use electronic cigarettes as prescription drugs to help smokers quit smoking. This is a major change led by Sajid Javid, the British Minister of Health and Social Security, in regulating the regulation of electronic cigarettes, and the first country in the world to grant electronic cigarettes to medical products. Electronic cigarettes in Germany also comply with the same laws as tobacco products, and are prohibited from being sold to people under the age of 18. Germany regulates electronic cigarettes as tobacco products. It plans to fully implement the ban on tobacco advertising from 2022, and ban smoking and advertising of electronic cigarettes from 2024. Throughout European countries, the sales of electronic cigarettes are basically allowed to a certain extent, but compared with European countries, Southeast Asian countries are more conservative. In Southeast Asian countries and the Middle East, most countries tend to adopt an electronic cigarette ban, that is, directly prohibit the import and sale of electronic cigarettes, and curb the sale of electronic cigarettes from the source. China is also open to the outside world in terms of policy. In recent two years, with the rapid development of China's electronic cigarette market, the policy supervision of electronic cigarettes has also been gradually strengthened, especially in the protection of minors, a series of regulatory and preventive policies have been introduced. On February 2, 2021, the State Tobacco Monopoly Administration issued the Measures for the Administration of Electronic Cigarettes (Draft for Comments), which clarified the regulatory policies for the production, wholesale, retail, import and export of electronic cigarettes (excluding heated cigarettes). In November 2021, electronic cigarettes and other new types of tobacco will be officially included in the tobacco system. Since then, the electronic cigarette industry has ushered in a policy intensive release period. On November 26, 2021, the State Council issued a revised Regulation on the Implementation of the Tobacco Monopoly Law of the People's Republic of China, and electronic cigarettes were officially included in the supervision of traditional tobacco; On November 30, 2021, the State Tobacco Monopoly Administration issued the National Standard for Electronic Cigarettes (Draft for Comments), which clarifies the national standard for electronic cigarettes; On March 11, 2022, the State Tobacco Monopoly Administration issued the Measures for the Administration of Electronic Cigarettes, specifying that from May 1, 2022, it is prohibited to sell flavored electronic cigarettes other than tobacco flavors and electronic cigarettes that can add aerosols on their own. On May 1, 2022, the Administrative Measures for Electronic Cigarette will be officially implemented; On June 15, 2022, the national unified electronic cigarette trading management platform was officially launched; On October 1, 2022, the Compulsory National Standard for Electronic Cigarettes will also be implemented. So far, the electronic cigarette industry has ushered in a new development stage of "laws to follow and standards to follow". From the current policy level, the supervision of the electronic cigarette industry has moved from the policy formulation stage to the policy implementation stage. From the perspective of companies, the main domestic listed companies in the electronic cigarette industry at present include Foxcore Technology, Warburg International, Simore International, Jinjia Shares, Yingqu Technology, etc. Since 2021, the share prices of the above related companies have dropped by 50% - 90%. Under the background of continuous release of negative policies and continuous growth of overseas markets, will the stock prices of relevant companies usher in new opportunities?
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