[summary of the research report]
Company profile:RLX Technology Inc.Yueke, a leading domestic atomized e-cigarette brand, has five generations of bullet-type cigarettes and two disposable cigarettes, with a market share of 62.6% in the first nine months of 20 years. The company listed on the New York Stock Exchange on January 22nd with an initial public offering of 116.5 million shares at a price of $12 / ADS and raised $1.398 billion for product research and development, channel construction and supply chain capacity improvement. After the public offering, the founding team and employees held 54.3% of the shares.
E-cigarette industry: in 1919, China's atomized e-cigarette market was worth US $1.5 billion, and it is estimated that CAGR will be 66% in the next 4 years. The growth is mainly driven by the increase in penetration. In 1919, the penetration rate of atomized e-cigarettes in China was only 1.2%, far lower than 32% and 50% in Britain and the United States. The essence of permeability improvement lies in the harm reduction characteristics of atomized e-cigarettes, which mainly transform new smokers with younger age and shorter smoking age. The cigarette cartridge has the property of fast consumer goods, the business model is better, and the cigarette rod is the invisible threshold. Contract manufacturers, brands, distributors and retailers account for 12%, 21%, 12% and 40% of the smoke bomb value chain, respectively.
Core competence: at the end of September 20, Yueke has 110 dealers, 5000 stores (currently about 10, 000) and 100000 authorized stores. The specialty store is the only way for the brand to show and interact with the users. authorized shopkeepers to meet the immediate consumption needs of users, the number of channels is far more than that of competing pairs, which makes Yueyi has a significant advantage in customer acquisition and repurchase. At the same time, the social attribute of e-cigarette is very strong, and Yueyu's high brand recognition is also beneficial for customers to obtain. Different from the low-cost drainage products generally launched by the competition pair, Yuejie has a higher price, mainly for middle and high-end users. In terms of products, the speed of iteration and innovation is obviously faster than that of competition, and it also has a strong ability of smoke training and structural design. In addition, the founding team has a compound background of FMCG and the Internet, has worked in DiDi Global Inc., and has some experience in crisis public relations.
Growth driving force: Yue Zhe pays attention to the protection of minors, and actively practicing social responsibility is the basis of growth. Yueke store has low early investment, strong profitability and short payback period, which will drive the rapid expansion of the number of stores in the next three years. There are more than 5 million cigarette outlets in China, and the number of outlets in Yue carving is only 2%. There is a lot of room for opening stores in the future, especially in third-and fourth-tier cities where the density of stores is low. The number of Yueke outlets has tripled over the past 20 years, but the organizational structure and the number of employees have not kept up. Improving operational capacity and enabling terminals will be a major attraction in the future.
Review and revelation: JUUL is the leading e-cigarette brand in the United States, with a market share of more than 70% at one time and is now stable at 50%. The success of JUUL is mainly due to three factors: the invention of nicotine salt to increase the conversion rate of traditional American smokers, aggressive marketing strategies to attract young users, and strong research and development of flavored tobacco. However, because JUUL is very popular among teenagers and touches the bottom line of regulators, it continues to be subject to regulatory scrutiny and public opinion pressure, and the business has entered a period of adjustment. It can be seen that the implementation of social responsibility is the basis for the healthy growth of e-cigarette enterprises, and the introduction of new technologies may subvert the existing competition pattern. Due to the tightening of domestic supervision, there is no possibility of overtaking through marketing corners.
Profit forecast and investment rating: the company's revenue in 20-22 is expected to be 4.679 billion, 9.799 billion and 16.069 billion yuan, and the adjusted return net profit is 852 million, 2.297 billion and 4.086 billion yuan. The current share price is 71x (based on adjusted earnings per share) for 22 years of Pamp E, covering the company for the first time, giving it a "recommended" rating.
Risk hints: policy control exceeds expectations; channel expansion is lower than expected; reliance on a single supplier; industry competition intensifies.
