Event

On June 23, US time, FDA's official website informed that it refused to authorize the sale of all JUUL products, that is, JUUL's PMTA application was not approved, and must stop selling and distribute all products currently on sale, including JUUL e-cigarette devices and four types of smoke bombs: Virginia tobacco bombs with 5.0% and 3.0% nicotine, and peppermint shells with 5.0% and 3.0% nicotine.

Comment

The JUUL review failed mainly because the product FDA rejected JUUL's PMTA application mainly because FDA determined that these applications lacked sufficient evidence on the toxicological characteristics of the product to prove that the sale of the product was suitable for the protection of public health, but did not mention related reasons such as the attraction of JUUL to minors. On the whole, the core of FDA's audit of PMTA lies in the safety and mitigation of the applied product.

Based on the audit idea of safety and harmfulness, the Vuse Alto series is more likely to pass the audit: we believe that under the current thinking of FDA for PMTA audit, it will be smoother for products that have a complete reason to prove their safety and harm in the future to pass PMTA. Previously, the NJOY ACE of Simor OEM has passed the PMTA audit on April 26, and the reason given by FDA is that it reduces harm compared with cigarette products. To some extent, the safety and hazard reduction of Simor atomization core has been confirmed by FDA officials. And British American Tobacco PLC Vuse, a big customer of Si Moore, has previously passed several series of products through PMTA. On the whole, the Vuse Alto series manufactured by Simor (which accounts for more than 90% of Vuse revenue in 2021) is still relatively likely to pass PMTA in the future.

If the Vuse Alto series successfully passes PMTA, Seymour's overseas business growth is expected to accelerate significantly:

JUUL used to be the biggest competitor of Vuse in the US market. In recent years, Vuse has gradually grabbed JUUL market share through scientific and effective market and product strategies. According to Nielsen's statistics for convenience stores, as of May, Vuse's market share in the United States has officially surpassed Juul, reaching 35.1%, becoming the first market share in the United States, but Juul still has 33.1% share. If Juul withdraws from the US market, Vuse share is expected to accelerate. While the overall expansion of the US e-cigarette market continues, the further increase in Vuse share will significantly accelerate the growth rate of Seymour's overseas market in the second half of the year, and open up room for future growth.

Investment suggestion

We estimate that the company's EPS from 2022 to 2024 will be 0.73 yuan / 1.01 yuan / 1.24 yuan respectively, and the current share price will be multiple of 25-18-14 corresponding to PE, maintaining a "buy" rating.

Risk hint

Industry policy regulation exceeded expectations; PMTA certification failed; exchange rate fluctuated sharply.