On May 20, it was learned from Shenzhen Tobacco Monopoly Bureau that the layout Plan of Shenzhen E-cigarette Retail outlets was officially released yesterday and came into effect today. E-cigarette plate strengthened, Huabao shares (300741.SZ) and Dianlian Technology (300679.SZ) rose more than 10%, Xingmin Zhitong (002355.SZ) rose by the daily limit, reaching a total of electric sound (002655.SZ), Jiyou shares (603429.SH) and so on.

In terms of news, recently, 25 provinces, municipalities directly under the Central Government, autonomous regions and separately listed cities have announced the number of e-cigarette retail licenses in their regions. As of 20:00 in the afternoon, Jiangsu ranked first with a total of 5057 licenses, Henan ranked second with 3532, Zhejiang ranked third with 3428, Sichuan ranked fourth with 3188, Hebei ranked fifth with 2213, and Qinghai ranked last. At present, the national total is 39553.

On April 25, the State Tobacco Monopoly Bureau officially issued several policies and measures on promoting the legalization and standardization of the e-cigarette industry (for trial implementation). Emphasis is placed on (1) adherence to the market price mechanism, (2) management of total domestic sales, (3) promotion of industrial clusters, (4) encouragement of technological innovation, and (5) introduction of tax policies. Bring the e-cigarette industry into the regulatory development model of "the combination of market guidance and government regulation and control".

It is reported that in the global market, the size of the e-cigarette market is increasing year by year, 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. In the domestic market, the penetration of e-cigarette products is low. 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. In terms of e-cigarette consumption, the per capita consumption of e-cigarettes is $62.70 in the United States and only $0.19 in China. According to the Blue Book of E-cigarette Industry released by the Forum, it is estimated that the retail volume of e-cigarettes in the domestic market will reach 19.7 billion yuan in 2021, an increase of 36% over the same period last year. Therefore, there is great potential for e-cigarettes in the Chinese market.

At the corporate level, according to$Smoore International Holdings Limited (06969.HK) $According to the 2020 financial report, the income of e-cigarette manufacturer Smoore International Holdings Limited from 2019 to 2020 was about 3.274 billion yuan and 3.881 billion yuan, an increase of 18.5 percent over the same period last year, of which gross profit was 41.5 percent and 49 percent, up 7.5 percent. From this we can see that the profitability of e-cigarettes can attract more and more enterprises to join the bureau. For example, in 2020, BYD Electronic applied for a patent called "A kind of e-cigarettes". In addition, Tianyin Holdings announced in 2021 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.

The agency said that compared with foreign markets that have gone through a similar stage of development of the e-cigarette industry, after standardized rectification, the penetration rate of e-cigarettes in China is indeed likely to further increase. However, some institutions believe that the e-cigarette industry will usher in a more difficult time, and permission from the competent authorities is needed to enter all fields of e-cigarettes. Various "shackles" pull e-cigarettes and traditional cigarettes back to a track to compete, suppressing the e-cigarettes, which could have been growing rapidly, and the regulatory policies are more stringent than the industry expected.

It is true that the e-cigarette industry is a platinum track, but whether it can successfully get a piece of the pie remains to be seen.

Related beneficiary targets:

Huabao (300741.SZ) mainly sells food flavors, daily flavors and food ingredients, which are widely used in food, beverage, cigarette, daily chemical and other fields.

300679.SZ said on the interactive platform on July 9, 2020: the subsidiary business of the company is the contract production of e-cigarettes.

(002355.SZ) on April 10, 2019, the company issued the announcement of signing a strategic cooperation agreement, indicating that the company will set up a joint venture with Zhaotong Gastrodia Industrial Development Company to focus on developing high-end e-cigarette consumables made of industrial hemp; at the same time, the business scope of Yunnan Yongma Biotechnology Co., Ltd., a holding subsidiary, covers the production of e-cigarette oil.

Gongda Electro Acoustic (002655.SZ) is mainly engaged in the R & D and manufacture of related consumer electronics and acoustic products, such as audio, e-cigarette, automobile central control, dashboard, rearview mirror and so on.

603429.SH is mainly engaged in the R & D, production and sales of e-cigarettes, cigarette sets, electronic atomizers, electronic digital products, e-cigarette oil and essential oil.