Events:
FDA releases MDO to all products currently sold by JUUL in the United States. On June 23, 2022, US FDA spoke to JUUL Labs Inc. The release of MDO (Marketing DenialOrders) requires the company to stop selling and distributing related products, and products currently sold in the US market must be removed from the shelves. The products involved include JUUL tobacco rods and four JUUL smoke bombs, namely Virginia tobacco flavor tobacco shells with nicotine concentration of 5.0% and 3.0% and menthol flavor tobacco shells with nicotine concentration of 5.0% and 3.0%.
Main points of investment:
JUUL has been awarded MDO, and public health and adolescent protection are still the main standards for PMTA audit.
According to the information released by FDA, the main reason for the rejection of JUUL is: on the one hand, there is a lack of evidence to prove the toxicological properties of its products in the materials submitted by JUUL, it is difficult to prove that the marketing of products is conducive to the protection of public health, and some data are insufficient or even contradictory; on the other hand, the marketing of JUUL is seductive to young people. FDA pointed out that JUUL played an inappropriate role in the rising use of e-cigarettes among young people. Combined with the relevant explanations of Njoy and other products that have been passed before, public health protection and adolescent protection are still important standards for PMTA audit.
Some of Si Moore's customer products have passed PMTA, and the company's products and manufacturing capabilities have been recognized by authoritative organizations, and the mainstream products of core customers have a high probability of being passed. So far, the e-cigarette products approved by PMTA include British American Tobacco PLC Vuse Solo/Vibe/Ciro, Nippon Tobacco Logic, Njoy Ace and other brands and products. Among them, Njoy is the first ceramic atomization product through PMTA, and it is also the third mainstream product in the United States in terms of market share. The adoption of Njoy has certain reference significance, which is not only the affirmation of FDA for the safety and harm reduction of ceramic core products, but also the recognition of Si Moore products, manufacturing and other omni-directional capabilities. As the core mainstream product of British American Tobacco PLC, the overall product performance of Vuse Alto is better than that of Solo, Vibe and other early products, and each series of products share the same technology and R & D platform, so we judge that the probability of Vuse Alto passing PMTA is relatively high.
The U. S. e-cigarette market pattern may change, good for Vuse, Njoy and other mainstream brands in the market, Si Moore is expected to benefit from market pattern optimization. Vuse currently ranks first in the US market share of atomized e-cigarettes with a market share of about 35%. Although JUUL continues to decline due to adverse factors such as youth marketing after 2018, it still occupies about 34% of the market share in the United States. After receiving the MDO order from PMTA, JUUL can still seek administrative suspension and appeal from the court, but in the short to medium term, JUUL's response to regulatory requirements will affect the company's actual business, and it will face the risk of withdrawing from the US market if the subsequent complaint is not successful. At present, some of Si Moore's core customers, such as Vuse and Njoy, have passed PMTA, which will most likely benefit from the optimization of the market pattern brought about by the reduction or even complete withdrawal of JUUL share, and Si Moore's share in the United States is expected to further increase.
Profit forecast and investment rating: the US market JUUL may face the risk of full withdrawal, steady progress of domestic policies, and gradual listing of new GB products. Seymour, as a leader, will fully benefit from the legalization process of industry regulation and the optimization of the market pattern. It is estimated that the company will achieve operating income of 135.65 pounds in 2022-2024, a year-on-year increase of-1.5 percent 21.83 percent and 23.45 percent. The net profit from the parent is 39.09 xPE 50.56 trillion, an increase of-26.07%, 29.34%, 22.40% over the same period last year, and the corresponding valuation is 30.38, 23.48, 19.19, maintaining the "buy" rating.
Risk tips: Vuse Alto and other related products PMTA failed; industry policy regulation exceeded expectations; competitors launched breakthrough technology; tax risk; exchange rate fluctuation risk.