Skyworth is not the first traditional giant to enter e-cigarette, and certainly won't be the last.

Not long ago, Skyworth Associates released an information about recruiting people with work experience related to e-cigarettes, which immediately aroused a lot of speculation and attention from the outside world. Whether it is due to its own financial situation and diversified industrial layout, or to see the great potential of the e-cigarette market, Skyworth to do e-cigarette is a challenging and unknown choice.

"Skyworth does not seem to have any outstanding advantages in making e-cigarettes at present.The core of e-cigarettes is not 'electronics', but 'smoke'. The core of electronic cigarette is the technology of tobacco oil regulation, flavor blending, atomization core and so on, not the R & D and production of electronic devices. Sales is now a monopoly license, brand license management, no pricing power. But Skyworth has more access to electronic components. " Du Xin, founder of mud lotus root capital, said to Pencil Road.

In the past two years, in addition to Skyworth, BYD, Tianyin Holdings, Lixun PrecisionAnd other industry giants have successively crossed the border to enter the e-cigarette. The reason is actually because of the profit temptation of the e-cigarette market. According to the data, the total amount of domestic sales and exports of e-cigarettes is expected to reach 150 billion yuan in 2021.

After many rounds of policy reshuffle, although the regulations on the e-cigarette industry tend to be strict, it has basically confirmed the legal compliance and sales status of new types of tobacco such as e-cigarettes in our country. E-cigarettes, which have been in the grey area, have found their own "legal boundaries" and come out of the regulatory vacuum.

After the establishment of the new pattern, who will stand out? Who will strike out again? For investment institutions, whether there are new investment opportunities for the e-cigarette industry, which has fallen from the tuyere?

-01 -Skyworth crosses the border again, this time it's e-cigarette.

Traditional home appliance giants layout e-cigarettes? This kind of operation is somewhat confusing.

Recently, a common recruitment information about Skyworth of home appliance enterprises has attracted the attention of the outside world.According to the data, not long ago, Skyworth Health Technology Co., Ltd. released the requirements for three positions: ID designer, structural engineer and foreign trade business manager, with special emphasis on "those with e-cigarette related experience can be admitted first."

According to the enterprise investigation, Skyworth Health has not been established for a long time. It was established on December 16, 2021, with a registered capital of 10 million yuan. It is mainly engaged in the import and export of e-cigarettes and nicotine for e-cigarettes, e-cigarette retail, e-cigarette wholesale and so on. It is worth noting that Skyworth Health's actual control after penetration is Skyworth Group, a holding subsidiary of Skyworth Intelligent equipment, which is 55% and 45% owned by Skyworth Smart equipment and quality win Technology, respectively. And quality win technology has been in the e-cigarette market for many years.

As a result, Skyworth's layout of e-cigarette news is basically certain.

From its establishment to now, Skyworth has gone through 34 years of history. Although the operation of e-cigarette makes people feel some magic, but in fact, from Skyworth's current industry status and the company's operating conditions, we can also see some clues.

First, it is actually out of consideration of its own financial situation and industrial layout.

Skyworth set a revenue target of hundreds of billions in 2018, but it is far from the target. According to Skyworth's latest financial data, taking the main business TV as an example, the domestic sales of Skyworth Group TV system products were only 7.597 million units in 2021, down 15.9% from the same period last year.

In addition to the decline in sales, Skyworth's profits are also gradually declining. During the reporting period from January to June in 2018, 2019, 2020 and 2021, the company's operating income was 2.69 billion yuan, 3.685 billion yuan, 3.739 billion yuan and 1.94 billion yuan, respectively. Profit margins were 12.04%, 14.96%, 13.19% and 11.03%, respectively.

Skyworth stated in its financial report that the company's net profit has declined due to factors such as the epidemic and rising raw material costs. If there are no signs of improvement in the future, the company may continue to show downside risks.

Second, in the face of the current financial dilemma, but also in order to increase profits, diversified development is the inevitable choice of Skyworth.

Skyworth started as a color TV, but with the development of Internet products, the profit of the color TV market is also gradually low, in the past period of time, from mobile phones, cars, to medical care, photovoltaic. Many household appliance enterprises choose to cross the border frequently in multiple industries. Skyworth has also made a series of diversified expansion attempts, from the launch of mid-and high-end color TV products, to the layout of photovoltaic, new energy vehicles and other areas, has never given up.

Third, although it has always been affected by policy, e-cigarette is recognized as an industry that makes a lot of money, and the market space is huge.E-cigarette maker Smoore International Holdings Limited has a gross profit margin of more than 40 per cent for enterprise products and its revenue grew at a compound annual rate of 94 per cent from 2016 to 2020. This kind of earning power can naturally attract more and more enterprises to join the bureau. For Skyworth, which is eager to improve profits, it is no exception.

Although it seems that traditional home appliance giants such as Skyworth are making e-cigarettes across the border, it remains to be seen whether Skyworth can make e-cigarettes well in the industry.

"Skyworth does not seem to have any outstanding advantages in making e-cigarettes at present. The core of e-cigarettes is not 'electronics', but 'smoke'. The core of electronic cigarette is the technology of tobacco oil regulation, flavor blending, atomization core and so on, not the R & D and production of electronic devices. Sales is now a monopoly license, brand license management, no pricing power. But Skyworth has more access to electronic components. " Du Xin, founder of mud lotus root capital, said to Pencil Road.

-02 -The giants gather for e-cigarettes to become popular?

Although Skyworth has aroused heated discussion about doing e-cigarettes this time, Skyworth is not the first big company to do e-cigarettes across the border.

As early as 2020, BYD Electronic applied for a patent called "an e-cigarette". Until the first half of 2021, the e-cigarette brand Lanpei revealed for the first time in its publicity that BYD Electronic was the contract factory behind it. BYD's e-cigarette business has also been to do contract manufacturing for brand customers. In November 2021, BYD Electronic Tobacco launched a "unique" ceramic atomization core, the brand side is BEEM.

Up to now, BYD's e-cigarettes have established cooperative atomization brands such as Airnow Air experiment, Maxfel extreme sense, Lan Pei, ICE Blizzard, V ZEON only, and so on.

In addition to BYD, many giants have attracted the attention of e-cigarettes in the past two years. Tianyin Holdings is also one of them. In 2021, Tianyin Holdings' first-quarter financial report showed that Tianyin Holdings fell into the dilemma of "increasing income without increasing profit", and the return on net assets fell to 0.41%.

In order to alleviate the financial dilemma, Tianyin Holdings chose to diversify and expand its business, targeting the e-cigarette brand Ono.The brand is built by a top team, and the R & D team is composed of Huawei, Smartisan and other senior technical experts, with cutting-edge technical strength in the hardware field. On July 20, 2021, Tianyin Holdings announced that Tianyin Communications, a wholly owned subsidiary of the company, signed an agreement with Shenzhen Ono Technology Co., Ltd., an e-cigarette company, to invest US $7.5269 million or the equivalent foreign currency in 7 per cent of Ono's proposed listed company.

BYD and Tianyin Holdings entered the e-cigarette Bureau in the form of purchase and cooperation, while Lixun Precision set up a wholly-owned e-cigarette company. In May and August 2021, Lixun Precision established wholly-owned subsidiaries Lixun Electronic Technology Co., Ltd and Liding Electronic Technology Co., Ltd. the main business scope is all around the production and sales of electronic cigarette atomizers (non-tobacco products, non-tobacco ingredients).

Why do so many giants choose to make e-cigarettes? The reason is actually because of the profit temptation of the e-cigarette market.

In the global market, the market scale is increasing year by year.The size of the e-cigarette market increased from US $12.4 billion in 2014 to US $36.7 billion in 2019, with an average annual compound growth rate of 24.2% and will reach US $82 billion by 2023. Among them, the European Union and the United Kingdom are the largest consumer market for e-cigarettes in the world, contributing 19.89% of the market share. This is followed by the United States, which consumed 56.40% of the world's e-cigarettes in 2019, with a market size of $20.7 billion.

In the domestic market, the penetration rate of e-cigarette products is low, and it is still a blue ocean market.According to CIC, the penetration rate of e-cigarette users in China increased from 0.4 per cent in 2016 to only 1.2 per cent in 2019. China has about 287 million tobacco consumers in 2019, but only 3.4 million e-cigarette users, the penetration rate is still low. In terms of e-cigarette consumption, China is also far lower than the United States, where the per capita consumption of e-cigarettes is $62.70, while that in China is only $0.19. But precisely because the scale of e-cigarettes in China is smaller than that in the United States, there is still great potential for e-cigarettes in the Chinese market.

According to the Blue Book of E-cigarette Industry, the retail volume of e-cigarettes in the domestic market in 2021 is expected to reach 19.7 billion yuan, an increase of 36% over the same period last year. In terms of exports, in 2021, domestic e-cigarette exports are expected to reach 138.3 billion yuan, an increase of 180% over the same period last year, of which more than 50% are exported to the United States.

Therefore, it is true that the e-cigarette industry is still a platinum race track, but it remains to be seen whether traditional enterprises can successfully get a piece of the pie by making e-cigarettes across the border.

-03 -Is there a new opportunity for e-cigarettes?

For some time, the barbaric development of the e-cigarette industry has also made the relevant government management departments continue to strengthen the supervision of the industry and speed up the formulation of relevant standardized management methods.

One of the most landmark time points is in October 2021. The decision of the State Council on revising the regulations of the people's Republic of China on the implementation of Tobacco Monopoly Law is formally implemented, in which it is made clear that electronic cigarettes and other new tobacco products shall be implemented with reference to the relevant provisions of these regulations, and electronic cigarettes will be formally regulated.

Then, the national standard of e-cigarette, which has been called for for a long time, finally came. On April 12 this year, the State Administration of Market Supervision and Administration and the State Standardization Administration approved the compulsory national standard for e-cigarettes (GB 41700-2022), which will be implemented from October 1, 2022. From October 1, all e-cigarette products must be produced in accordance with the national standard, limited in accordance with the 101 additives allowed by the national standard, and enter the national transaction management platform for sales and circulation.

The introduction of the above regulations and standards basically finally confirmed the legal compliance and sales status of e-cigarettes and other new types of tobacco in our country, and let e-cigarettes, which has been in a grey area, find their own "legal boundaries". Out of the regulatory vacuum.

Recently, the news about the taste restrictions of e-cigarette products once caused panic among people in the industry and consumers. All of a sudden, the trend of price increase sales is in chaos, and consumers hoard goods at high prices.

Many people think that now may not be a good time to enter the e-cigarette industry.An expert in the industry once analyzed that the e-cigarette industry has been strongly regulated, and the probability of taxation will rise significantly, which will lead to an increase in prices and will inevitably affect the decline of consumer demand. Therefore, when enterprises enter the bureau and invest in the e-cigarette industry, they still need to pay attention to the risks.

But there are also different opinions.Tianfeng SecuritiesAccording to the analysis, "the essence of e-cigarette products is to replace traditional cigarette products. In the future, e-cigarettes or return to the original attributes of tobacco, such as taste reduction degree and smoking experience, and companies with technical R & D strength are expected to gain more market share." In the short term, the sales of e-cigarettes will be reduced periodically due to taste constraints, and there is still some room for blending in taste. In the long run, with the full restoration of e-cigarette tobacco taste, the scale of China's e-cigarette market still has a lot of room for growth. "

Compared with foreign markets that have experienced similar stages of development of the e-cigarette industry, after standardization and rectification, the penetration rate of e-cigarettes in China is indeed likely to be further improved.In the United States, for example, FDA also issued a taste ban in 2020. The retail size of the US e-cigarette market dropped from $9.644 billion in 2019 to $9.378 billion in 2020, but is expected to rise to $10.299 billion in 2021.

"at present, there is likely to be a'28 'differentiation in the industry, and enterprises with real strength can gradually find a compliant development path in the process of development, so as to better carry out standardized development, but for previously irregular enterprises, this new policy will speed up the reshuffle of the industry." Industry analysts believe that this is also beneficial to the long-term development of the e-cigarette industry. Since the release of the national standard for e-cigarettes in April, the performance of leading companies such as Smoore International Holdings Limited and RLX Technology Inc. in the capital market can also be seen that capital still has confidence in the development of the industry.

Investors and entrepreneurial teams in the primary market also believe that there is still an opportunity for the e-cigarette industry. "the R & D and innovation capabilities of the team are scarce in the market at present, and they are also the abilities that investors value most when looking at the project. "said du Xin.

He believes that although the development trend is to restrict the sale of tobacco with other flavors, and new technology tobacco is also an area controlled by the national plan, the new tobacco technology can make the entire tobacco consumption users more digital and intelligent. and can enhance the consumer experience, in a healthier, environmentally friendly, harmless way to solve the pain points of smokers. " As the largest consumer product, tobacco also has the largest market, so there are still great opportunities in this industry. "