The 2024 Q1 financial update was released, and the company announced the 2024 Q1 financial update. After preliminary review, Q1 of 2024 achieved profit before tax of 400 million yuan, an increase of 25.2% over the previous year; achieved profit after tax of 340 million yuan, an increase of 12.8% over the previous year; and achieved total overall revenue of 310 million yuan, an increase of 5.6% over the previous year.
Global e-cigarette regulatory policies continue to be updated, and leading companies are welcoming good opportunities for compliance development in the domestic market. On March 18, 2024, the National Tobacco Monopoly Administration issued a notice to organize and carry out a special inspection to regulate the order of the e-cigarette market in 2024. This special inspection will last for 4 months and will crack down on the high-pressure situation of illegal e-cigarette production and operation, and continue to rectify acts disrupting the e-cigarette market order. In overseas markets, since December 2023, the FDA has issued MDoS for more than 20,000 types of flavored e-cigarette products, and only 23 types of e-cigarette devices or cigarettes have been authorized by the FDA, continuing to step up the crackdown on illegal products. Global e-cigarette regulations continue to become stricter, which is expected to drive market share to focus on compliant brands.
Pay attention to product research and development, and actively launch differentiated and innovative products
In 2023, the company invested about 1.48 billion yuan in R&D, an increase of 8.1% over the previous year, mainly in medical atomization products, non-combustible products when heated, and disposable electronic atomization products. In terms of medical atomization products, the company continues to promote the development and production layout of pharmaceutical combination products for asthma and chronic obstructive pulmonary disease. In terms of atomized beauty products, in March 2024, the company launched its first technical skincare brand, MOYAL Lanzhi, to launch fog essence products. This is the first time that the company's core TPS transdermal technology has been applied in the C-end beauty field. In terms of disposable electronic atomization products, the company's upgraded ceramic atomization heater technology platform FEELM Max, the high-explosive ceramic series technology platform, and COSS, a high-end product with automatic lubrication and charging series, were well received by the market.
Investment advice
We believe that under the trend of stricter global regulations, industry concentration will increase at an accelerated pace, while the company relies on compliance capabilities, technological leadership, a healthy customer structure and an open and flexible business model, competitive barriers are highlighted, and market share is expected to continue to increase. Furthermore, the nebulization medical/beauty/HNB business layout of the company is expected to gradually enter the expansion stage, providing new growth in performance. We expect the company to achieve operating income of 125.46/141.77/16.019 billion yuan in 2024-2026, up 12%/13% year over year; achieve net profit of 16.77/19.36/2,189 billion yuan, up 2%/15%/13% year on year; total share capital and closing market value corresponding EPS as of April 18, 2024 will be 0.27/0.32/0.36, and corresponding PE will be 25/21/19 times, respectively, maintaining the “buy” rating.
Risk warning
Policy uncertainty; new business falling short of expectations; increased industry competition; exchange rate fluctuations, etc.