Incident: Recently, the FDA's official website announced the approval of 4 menthol flavored e-cigarettes to be sold in the US market. The 4 approved products are all from NJOY, including 2 NJOY ACE products and 2 NJOYDAILY products.

Flavored e-cigarettes other than tobacco flavors were approved for the first time, and the direction of regulation gradually became clear. The FDA authorized NJOY's 4 menthol-flavored e-cigarettes to be sold in the US. This is the first time it has approved the sale of flavored e-cigarettes other than tobacco flavors in the US. The FDA believes there is sufficient evidence that several authorized menthol e-cigarettes help reduce exposure to harmful chemicals in traditional cigarettes, are harm-reducing, and the benefits of completely switching from traditional cigarettes to less harmful products may outweigh the risks to young people. As of June 21, 2024, the FDA has approved 27 e-cigarette products and devices, including the 4 menthol products authorized this time. At the same time, the approved products include disposable products. The FDA stated that any e-cigarette product sold legally in the US must pass the PMTA review. The direction of FDA supervision is gradually becoming clear. In the future, supervision of non-compliant products will be strengthened, which will benefit the increase in the share of compliant products. In the long run, vaping e-cigarettes are based on harm-reducing and cigarette replacement properties, and the long-term development trend will not change.

Menthol flavors are expected to be reviewed one after another, and the replacement may usher in new opportunities. The harm-reducing properties of NJOY menthol-flavored e-cigarettes have been recognized. Other brands of menthol products are also expected to be reviewed one after another. At the same time, the FDA will step up supervision of non-compliant disposable e-cigarettes. Compliance with disposable and recombustible products (menthol flavors account for a high proportion) may usher in new opportunities, focusing on SMOORE International, the leading global atomized e-cigarette OEM. The company's layout is SMOORE OEM. The company's layout is in various fields such as electronic atomization, non-combustion with heating, atomization for special purposes, and medical atomization. 2024Q1 achieved an overall net profit of 3.1 billion yuan. 5.6% year-on-year increase , returning to positive growth. Looking ahead, overseas regulators will tighten regulations on disposable products, and the development of bomb exchange products may usher in a turning point. The company will strengthen market insight and take on market opportunities brought about by stricter disposable product policies. The company bucked the trend and increased R&D, and is expected to launch differentiated products in various fields, cultivate new growth points, and look forward to the long-term growth of atomization leaders.

Investment advice: We expect the company's net profit to be 1,80/20.8/2.47 billion yuan in 2024-2026, corresponding PE of 29/25/21 times, respectively, to maintain a “buy” rating.

Risk warning: industry regulation has been tightened, market competition has intensified, and raw material prices have risen sharply