Leading technological R & D capability to create multi-brand competitive advantage
High quality company in the global electronic atomization equipment manufacturing industry: Smoore International Holdings Limited Holdings Co., Ltd. (hereinafter referred to as "the company" or "Si Moore") is a global leader in providing atomization technology solutions. business mainly includes the research, design and manufacture of closed atomization equipment and electronic atomization components for enterprise customers (tobacco companies, electronic atomization companies, etc.). And for retail customers to carry out their own brand open electronic atomization equipment or APV research, design and manufacturing, the main points of sale in more than 50 countries around the world. In 2021, the company is the world's largest manufacturer of electronic atomization equipment, with a market share of 22.8%.
The electronic atomization equipment industry is growing rapidly, and the global market has great potential for development: the steady growth of the global electronic atomization equipment market is partly driven by the continuous diversification and improvement of electronic atomization equipment. The global electronic atomization equipment market is expected to reach US $28.2 billion with a compound growth rate of about 25.3% from 2022 to 2026. Among them, the market for closed electronic atomization equipment will have a compound growth rate of about 24.6% in the next five years, open electronic atomization equipment about 11%, and special-purpose electronic atomization equipment about 45.8%. Therefore, the future market space of electronic atomization equipment industry is huge.
Technology research and development superimposed multi-brand matrix to help the company's competitive advantage: as the world's leading manufacturer of electronic atomization equipment, its FEELM ceramic core has cooperated with many world-renowned tobacco companies and electronic atomization companies, such as British American Tobacco PLC, Japan Tobacco, NJOY and Yueke. In 2022, the company launched a new generation of ultra-thin electronic atomizer product solution FEELM AIR, and ceramic core disposable solution FEELM MAX, continue to build the electronic atomization product technology brand represented by FEELM. In addition, the company has heated non-burning METEX brand and CBD atomized CCELL brand to create a multi-brand product matrix. The company pays attention to the development of R & D strength. In 2021, R & D expenditure reached 670 million yuan, accounting for 4.9% of the total income. By the end of 2021, the company had 15 production bases and 7 basic research institutes, with a total of 3408 patents applied for, including 1570 invention patents. The company will continue to increase investment in research and development, and it is expected that 1.68 billion yuan will be invested in 2022 to expand the company's competitive advantage.
Optimistic about the diversified development of the company, with a target price of HK $24.7, covering it for the first time and giving a buy rating: affected by the policy of the domestic e-cigarette industry, the company's domestic sales will be affected to a certain extent this year. However, we believe that the company will benefit from the continuous growth of e-cigarette industry penetration and the increase of industry concentration under strict policy supervision. it is estimated that the company's revenue from 2022 to 2024 will be 139.2 yuan 15.49 billion yuan respectively, and the net profit attributable to the parent company is 4.54 billion yuan respectively. Based on the valuations of similar companies, we give the company a target price of HK $24.70, corresponding to 28 times PE in 2023, which is 40.7% higher than the current price, so we give a buy rating.
Risk factors: increased impact of e-cigarette policy, increased competition, lower-than-expected production capacity construction, fluctuations in raw material prices