The current situation of the company
On June 23, FDA announced that 1. PMTA refused to authorize the sale of JUUL-branded e-cigarette products because JUUL (non-Moore customers) could not provide evidence on the protection of public health, which may be cleared out of the US market in the future. JUUL is the second largest e-cigarette brand in the United States, and we expect that if it cannot be sold legally and compliantly in the US market, its share is expected to be preempted by other head brands that can pass the PMTA audit in the future, benefiting from the manufacturing leader represented by Smoore International Holdings Limited, and the market share is expected to continue to increase, the stronger the stronger.
Comment
1. JUUL has not been approved by PMTA and may need to withdraw from the US market in the future. The FDA notice said that JUUL's PMTA application lacked sufficient evidence about the toxicological characteristics of the product to prove that the product was sold to protect public health. And some of JUUL's findings have caused some concern, including insufficient and contradictory data about genotoxicity and potentially harmful chemicals from JUUL proprietary electronic liquid smoke bombs. Therefore, based on the lack of sufficient evidence to assess the potential toxicological risks and other potential hazards of using JUUL products, FDA granted a JUUL brand marketing refusal order (MDO), which may not be legally available for sale in the United States in the future.
2. Some of the major customers' series and SKU have passed PMTA and are expected to gain more market share in the future. According to the FDA historical announcement, some of the series and SKU of Si Moore's major American customers represented by Vuse, Njoy and Logic have successfully passed the PMTA certification. We believe that the company has successfully passed the rigorous audit of PMTA by virtue of its strong research and production capacity, excellent product quality and perfect patent system, and is expected to legally sell for a long time in the US market in the future. According to Nielsen data, JUUL's market share in the United States was about 33% in May this year, making it the second largest e-cigarette brand in the United States. We expect that with JUUL being cleared out of the US market in the future, Seymour is expected to continue to quickly gain market share with its customers' approved products (note: Seymour's core customer products, such as Vuse alto, are still in the PMTA approval stage).
3. Continue to be optimistic about the company as a global atomization technology leader with deep barriers and outstanding advantages, and continue to increase its share in the future, reiterating that the stronger the stronger. We believe that the company's comprehensive competitive advantage is outstanding, and its leading FEELM technology continues to enable key customers to rise rapidly, and is expected to lead the atomization industry to change and maintain its global leading position through increased R & D investment and technological innovation in the future. With the continuous promotion of policies at home and abroad, the company is expected to continue to benefit from the rapid growth of the atomization industry and the concentration of share to its head customers, the stronger the stronger.
Profit forecast and valuation
Keep the earnings forecast for 2022amp 2023 unchanged, and the current share price corresponds to 2022x2023 29max 22x Pamp E, maintaining an industry rating that outperforms. Based on the fact that the continued landing of policies at home and abroad is expected to lead to a continuous increase in the company's share, we raise our target price by 8% to HK $28, corresponding to 2022 and 2023, which is 29% higher than the current share price.
Risk
Policy regulatory risk, customer dependence risk, technical risk, exchange rate fluctuations.