On November 23, the State Tobacco Monopoly Administration issued a notice on the limited carrying of e-cigarette products, aerosols and nicotine for e-cigarettes in different places, which limited the amount of nicotine for e-cigarettes every time each person carried them in different places. Specifically, the circular stipulates that the number of smoking sets to be carried in different places shall not exceed 6; the number of electronic cigarette cartridges (liquid atomized substances) shall not exceed 90; the number of products sold in combination with cigarette cartridges and smoking sets (including disposable electronic cigarettes, etc.) shall not exceed 90; atomized products such as liquid smoke and nicotine for electronic cigarettes shall not exceed 180ml. Industry insiders said that the introduction of the new rules on the delivery of e-cigarettes will help to crack down on illegal and counterfeit products and safeguard the interests of consumers.To some extent, it can further restrict the circulation of illegal products.The release of the new rules meansThe regulation is further refined, and the management standards for e-cigarettes are becoming more and more unified with traditional tobacco.With the limited management of sending and delivering e-cigarette products, the industry will usher in a more standardized development.

On the same day, the State Tobacco Monopoly Bureau and the State Post Bureau jointly issued a circular on the limited delivery of e-cigarette products, atomizers, nicotine for e-cigarettes, and so on, and limited management was also implemented for the delivery of e-cigarette products, atomization and nicotine for e-cigarettes. Specifically, the circular stipulates that each piece of e-cigarette products sent and delivered shall be limited to 2 cigarette sets; 6 e-cigarette cartridges (liquid atomization) or products sold in combination with cigarette cartridges and cigarette sets (including disposable e-cigarettes, etc.), with a total smoke liquid capacity not exceeding 12ml. Each piece of nicotine for nebulization such as cigarette liquid and electronic cigarette is limited to 12ml. Send and deliver cigarette sets, electronic cigarette cartridges (liquid atomization), cigarette cartridges and cigarette sets sold in combination (including disposable e-cigarettes, etc.), atomized products such as cigarette liquid, nicotine for electronic cigarettes, one piece per person per day, no more than one piece per day.

On October 25, the Ministry of Finance, the General Administration of Customs and the State Administration of Taxation issued the latest announcement on the collection of consumption tax on e-cigarettes, in which it is clear that e-cigarettes will be included in the scope of consumption tax, and electronic cigarettes will be added under the category of tobacco tax. E-cigarettes shall be taxed on an ad valorem basis. The tax rate of production (import) is 36%, and that of wholesale is 11%. Effective from November 1st.

On the above news, industry insiders said that the tax regulations introduced this time are actually the calculation of taxes on e-cigarettes based on the ad valorem rate, that is, the tax rate of the production (import) link is 36%, and that of the wholesale link is 11%. At the same time of this adjustment, there are some implied tax burdens to be considered. The actual tax rates borne by brands and distributors are 40.32% and 12.32% respectively.

In the early morning of November 1, many e-cigarette retailers waited in front of the national unified e-cigarette trading management platform to update the tax wholesale price and suggested retail price of e-cigarette products. After the price update, the information shows that Yue carving, grapefruit, magic flute, Ono, Kemi, firearms and other brands of smoking sets and smoke bombs have increased in varying degrees.

Take Yueyue carving, which has a wide audience as an example, the wholesale prices of its four types of cigarette sets range from 32.83% to 95.3%, and the suggested retail prices range from 33.52% to 97.49%. The wholesale prices and suggested retail prices of the four types of cigarette bombs also rose to varying degrees.

Another e-cigarette brand, grapefruit, increased the wholesale price of grapefruit by 38.89%, the wholesale price of cigarette cartridges by 54.67% and 59.9% respectively, and the suggested retail price by 39.06% and 54.79% and 60.6% respectively.

In the non-standard stage of the rapid development of the industry, the e-cigarette track is profitable. According to the financial report, in 2021, RLX Technology Inc., the parent company of Yueyue carving, had a gross profit margin of 43.1%, while Smoore International Holdings Limited, a contract manufacturer of many well-known brands in China, had a gross profit margin of 53.6%.

Industry insiders saidIt is a general trend for e-cigarettes to replace traditional cigarettes, but the era of high gross margin is over.For enterprises, they can produce more diversified e-cigarette products to meet the needs of different consumers; for dealers, blindly raising prices to maintain profits is not a long-term solution, product prices and industry profits will eventually return to rationality.

Guosheng Securities analysis believes that taxation makes the overall profit margin of the industry return to normal, and increases the barriers to entry of the industry. Leading enterprises in the industry can smooth the impact of tax increases by virtue of multiple advantages such as scale, automation and strong bargaining power.Small and medium-sized manufacturers may speed up clearing, and market concentration will be further enhanced.

Judging from the performance of the e-cigarette stock market$Smoore International Holdings Limited (06969.HK)$It opened sharply higher in early trading on November 24, rising as much as 8%. As of press time, it was at 11.26 Hong Kong dollars per share.

Related concept stocks:

$Smoore International Holdings Limited (06969.HK)$The company recently released ceramic core disposable atomization solution FEELM Max and more than 10 disposable products, FEELM ceramic atomization technology leading the industry for 2-3 years. The company has a market share of 22.8% in the field of electronic atomization equipment manufacturing in 2021, making it the largest electronic atomization equipment manufacturer in the world.

$China Tobacco International (06055.HK)$The company is the designated offshore platform for China Tobacco International which is responsible for capital operation and international business development. The company's operating income in 2021 was HK $8.064 billion, an increase of 131.42% over the same period last year, and the net profit attributed to the parent company was HK $703 million, an increase of 562.29% over the same period last year.

$CHINA BOTON (03318.HK)$The company is mainly engaged in the research, development, production, trade and sales of extracts, spices and flavors, as well as the design and manufacture of high-quality e-cigarettes and related products.

$HUABAO INTL (00336.HK)$The company's core business includes research and development, production, sales and services of flavors, flavor raw materials, tobacco raw materials and condiments.