RLX Technology Inc.(Yuejie) is the first consumer brand of electronic atomized cigarettes in China, with a substantial increase in revenue. The company is mainly engaged in the research and development, design and sales of RELX Yueyu brand closed electronic atomized cigarettes, including cigarette sticks and cartridges. From 2020 to the first three quarters of 2018, the company's main business income increased significantly from 133 million yuan to 2.201 billion yuan, with an increase of 93.3 percent in the first three quarters of 2020 compared with the same period last year. Adjusted net profit increased from 7 million yuan to 382 million yuan, and increased by 169.8 percent in the first three quarters of 2020. As of the first three quarters of 2020, Yueke brand had a 62.6% domestic market share, according to Zhaoshi Consulting.
China's e-cigarette market is growing explosively, waiting for the arrival of the "GB" policy. The Chinese market has a large number of smokers, low e-cigarette penetration, e-cigarette has a broad market space, superimposed mature industry chain advantages, in 2017 after the rise of domestic e-cigarette independent brands, the industry showed explosive growth. According to cautionary data, China's closed electronic atomized cigarette market is about $1.1 billion in 2019 and is expected to reach $11 billion in 2023, with a CAGR of 77.5% in 2019-2023, far exceeding the global industry average. At present, China's e-cigarette regulatory policy is still in its infancy, lack of national standards, with reference to the policy demonstration effect of FDA in the United States, we believe that once the "national standard" is issued, it will effectively regulate China's e-cigarette industry, benefit the leading enterprises in the industry, and further enhance market concentration.
Under the advantages of products, brands and channels, the company's increment and stock go hand in hand. 1) in terms of products, there is a strong product-driven attribute in the e-cigarette industry, and the company meets the differentiated needs of consumers through rapid iteration and omni-directional layout of products. The company attaches importance to R & D and design, takes the lead in launching consumers' favorite smoke oil flavor, and won the German Red Dot Design Award. The company's main products use the Feelm ceramic core provided by Smoore International Holdings Limited, and excellent suppliers can further enhance the competitiveness of the company's products. By the end of 2020Q3, the consumer recommendation index for Yueke brand has reached 63.8 points. 2) in terms of brand, the company preemptively builds brand barriers through a huge amount of marketing investment before the e-cigarette ban in 19 years, and promotes user loyalty through actions such as community operation and corporate responsibility. 3) in terms of channels, the company attaches importance to offline channel development. by the end of 2020Q3, it has 110 dealers, 5000 specialty stores and 100000 authorized stores, and the mental share of consumers has reached 67.6%.
Profit forecast: we estimate that the company will achieve revenue of 44.3,98.7 and 14.28 billion yuan from 2020 to 2022, an increase of 185.9%, 122.9% and 44.6% over the same period last year. The adjusted net profit was 7.5,16.7 and 2.38 billion yuan, up 1477.0%, 121.6% and 42.9% over the same period last year. Corresponding to EPS0.48, 1.07,1.54 yuan.
Risk hints: e-cigarette policy risk, e-cigarette product risk, increased competition risk, industry chain risk, public information used in research reports may lag behind or not updated in a timely manner.
