Seymour is releasing FEELM Air new technology overseas. Three major innovations & seven breakthroughs are committed to thinner, stronger performance and harm reduction, further consolidating the leading position of ceramic atomization technology in the world. We expect that with the gradual application of new technology in new products, it is expected to support the company's product pricing and gross profit space, while technological innovation iteration, brand matrix improvement and atomization scene diversification are expected to build medium-and long-term competition barriers. Short-term policy disturbance under the weakening demand at home and abroad does not change the company's medium-and long-term business trend, waiting for PMTA catalysis. Maintain a "buy" rating.
Event: FEELM Air release, thinner, stronger, and less harmful. On January 18th, the company held a new technology conference in London, UK, and officially launched a new generation of ultra-thin electronic atomization solution FEELM Air. Three major innovations: the first seven-layer composite heating film to improve harm reduction and energy efficiency; nano-scale vacuum coating from 80 μ m to the thinnest 2 μ m; and the original porous three-dimensional bionic structure is more breathable and leak-proof. Seven breakthroughs: harm reduction greatly increased by 80%; fresh locking technology Flavor-Lock improved taste reduction by 33%; "labyrinth second generation" anti-leakage technology platform improved leak-proof performance by 237%; ultra-high energy efficiency, increased by 13% compared with the previous generation to 1.3mg white W; the world's minimum linear motor enhanced human-computer interaction; super energy management system Topower can be charged for 10 minutes and enjoy 8 hours; MEMS sensor technology to achieve more sensitive control and prevent false start.
New technologies support pricing and gross profit in the short term, and dig a moat in the medium and long term. After the release of the new technology, the company will steadily promote cooperation with customers at the product level, and we judge that due to domestic regulatory restrictions, overseas markets are expected to achieve product debut. In the short term, the new technology will further consolidate the company's leading position in ceramic atomization technology, and we expect the pricing of new products to be improved, which is expected to support product pricing and gross profit space. In the medium and long term, the company is expected to rely on strong research and development capabilities to continue iterative atomization technology to promote more atomization scenarios, while FEELM brand matrix and C-end marketing are expected to continue to improve, leading technology-product and C-end brand awareness to build core competition barriers.
Domestic tracking: 2021Q4 domestic market recovery is not as expected under the pressure of the New deal. With the release of the consultation draft of the new national standard-e-cigarette management measures, the industry has entered a transitional period, during which no new production capacity, brands, sales outlets, new products and so on can be added, and short-term companies are under pressure in the domestic market. According to our follow-up research and model estimates, Yueke's income declined in December from the previous month (about-15 per cent). We expect RLX Technology Inc. 's 2021Q4 income to be about 1.8 billion, only about 10 per cent higher than the Q3 low, lower than we had expected. To sum up, we lowered the 2021-23 growth forecast for RLX Technology Inc. 's contribution to Si Moore to + 100% Universe 5% Universe 20% (the original forecast: + 130% Universe 30% Universe 32%).
Overseas tracking: the trend of major customers continues, waiting for PMTA catalysis. According to British American Tobacco PLC, VUSE continues a strong trend. 21Q1-3 VUSE has a market share of 34.1% in the global TOP5 atomization market, a year-on-year + 6.9pcts, expanding its leading edge. The procurement forecast growth rate for the whole year of 2022 is still fast, and the cooperation is in-depth and stable. LOGIC and NJOY continue to shrink and reach the bottom, and there is a high probability of positive growth on the low base of the previous year in 2022. Follow-up focus: 1) disposable cigarette products and new technologies are expected to increase performance in 2022; 2) PMTA progress is expected to boost overseas business fundamentals and valuation expectations in the short term.
Risk factors: menthol taste cannot be replaced by PMTA; subversive atomization technology path; the industry is more regulated than expected; new tobacco products are in the tax channel.
Investment suggestion: in view of the disturbance of short-term demand caused by domestic and foreign regulation, we downgrade the company's operating income forecast for 2021-2023 to 13.32 billion / 15.73 billion / 19.19 billion yuan (original forecast: 14.12 billion / 18.06 billion / 22.66 billion yuan), lower the 2021-23 adjusted net profit forecast to 5.34 billion / 643 billion / 7.88 billion yuan (original forecast: 5.70 billion / 74.2 billion / 9.38 billion yuan) Corresponding to the prediction of 0.89amp 1.07 EPS 1.31 yuan (the original prediction: 0.95 pound 1.23 pound 1.56 yuan). It is optimistic that the company will continue to consolidate its leading position in atomization technology and brand, most definitely share the medium-and long-term penetration growth dividend of the new tobacco industry, maintain the target price of HK $56, corresponding to about 43x PE in 2022, and maintain the "buy" rating.