Incident: The FDA approved the sale of 4 menthol e-cigarettes in the US for the first time. According to the FDA's official website, the FDA approved the launch and sale of 4 menthol e-cigarettes under NJOY on June 21. This is the first time that the FDA approved the sale of non-tobacco-flavored e-cigarettes in the US. Considering that menthol has received marketing bans before, it is obvious that the market's regulatory expectations for menthol e-cigarettes will be revised. For the company, on the one hand, as NJOY's core supplier, exchangeable products are expected to benefit from improved terminal sales. On the other hand, the NJOY review also strengthens confidence that the Vuse series will pass the review, and demand flexibility can be expected. We expect EPS to be RMB0.28/0.33/0.39 yuan in 24/25/26. Referring to comparable company Wind, we agree that the average PE value is 22 times in 24 years. Considering that the company continues to strengthen product innovation and category expansion, the R&D and management advantages continue to be consolidated, and the compliance market value is outstanding after the implementation of each country's regulatory policies, the long-term value attributes are prominent, and the target price is HK$11.36 for 24 years, maintaining a “buy” rating.
Policy interpretation: The review of menthol e-cigarettes reflects changes in FDA regulatory thinking, boosting market expectations that youth protection is the core starting point of e-cigarette regulation in European and American countries. Flavored cigarettes have been strictly approved in recent years, but poor implementation of regulations has led to the spread of non-compliant markets, and the actual results are not good. This time, the FDA has reviewed 4 menthol-flavored products for the first time, including 2 recombinant menthol cigarettes (NJOY ACE 2.4% and 5% concentration) and 2 disposable products (NJOY DAILY 4.5% and 6% concentration), reflecting changes in regulatory thinking: 1) The harm reduction effect of FDA approved products on adult smokers exceeds the potential negative impact, that is, the value of moderately flavored e-cigarettes is recognized; 2) Combined with the FDA's active withdrawal of the marketing ban on JUUL's products, this means that the FDA's regulation of e-cigarettes is not a package It is prohibited, but rather emphasizes scientific evidence, and compliant companies that meet technical and safety requirements are expected to benefit.
Company impact: Short-term benefit policy catalysis/customer sales, which is expected to benefit from a short-term perspective on compliance market development, NJOY is the first menthol-flavored e-cigarette brand to be approved, and the channel continues to expand after NJOY is acquired by Altria to provide channel support for sales of compliant products, and the company is expected to benefit as a core supplier of NJOY. From a medium- to long-term perspective, the NJOY review brings more possibilities for other brands of menthol e-cigarettes to be reviewed. The company's sales of menthol e-cigarettes in the US are expected to be boosted, leading to business structure optimization and improved profitability; in the long run, the company is expected to benefit from the development of the compliance market, and the company continues to strengthen product innovation and category expansion, continuously consolidating competitive barriers, and highlighting long-term value attributes.
Investment advice: Leading atomization equipment companies maintain a “purchase” rating. We expect the company's net profit to be RMB 1,701/20.23/RMB 2,420 billion for 24/25/26, respectively, and the corresponding EPS of RMB 0.28/0.33/0.39 yuan, respectively. Referring to the comparable company Wind, the average PE value is expected to be 22 times in 24 years, and the target price is HK$11.36 (1 RMB = HK$1.0961) in 24, maintaining the “buy” rating.
Risk warning: Industry policies are being tightened, industry competition is intensifying, and downstream demand falls short of expectations.