Event: Smoore International Holdings Limited issued an announcement that after Shenzhen Weipris, a wholly-owned subsidiary, obtained a tobacco monopoly production enterprise license on July 21, wholly-owned subsidiaries Shenzhen McWeill Technology and Shenzhen McBrother Technology were also granted tobacco monopoly production enterprise license. valid from July 25, 2022 to July 31, 2023. At present, three subsidiaries of Smoore International Holdings Limited have been granted licenses for tobacco monopoly production enterprises.

The examination and approval of domestic production licenses has been promoted in an orderly manner, and the pattern of Smoore International Holdings Limited's beneficiary industry has been continuously optimized according to the measures for the Administration of E-cigarettes issued by the State Tobacco Monopoly Bureau on March 11, 2022, it is necessary to obtain relevant tobacco monopoly licenses to engage in the production, wholesale and retail of e-cigarettes in China, and it is stipulated that the transition period is from May 1, 2022 to September 30, 2022.

With the landing of the regulatory policy, the license plate examination and approval work has progressed steadily, and the market share has accelerated to the head. According to the data published on the website of the State Tobacco Monopoly Bureau, as of August 1, 131e-cigarette-related enterprises had obtained tobacco monopoly production licenses, of which 11 e-cigarette brands had obtained production licenses for brand licensing, such as Smoore International Holdings Limited downstream customers Yueke, MOTI, etc.; Yuezhe was granted an annual production quota of 328.7 million cartridges, 15.05 million sticks and 6.1 million disposable e-cigarettes. Smoore International Holdings Limited, as the main manufacturer of Yueke, Magic Di, Shaddock and other compliant e-cigarette brands, all three subsidiaries have been granted tobacco monopoly production licenses as scheduled, which will also promote the company's overall production and operation and production and marketing scale to maintain rapid development. With the gradual standardization of the industry and the raising of the threshold for domestic e-cigarette production, Smoore International Holdings Limited, as the leader of atomization technology, is expected to continue to benefit from the improvement of the pattern and further enhance the concentration of the industry.

Major customer BAT new tobacco maintained high growth, overseas orders continued to increase the company's main customer British American Tobacco PLC 22H1 new tobacco product revenue of 1.283 billion pounds, a year-on-year increase of 45.5%, revenue share increased from 8% in 21 years to the current 10%; atomized e-cigarette brand Vuse achieved revenue of 590 million pounds, a year-on-year increase of 48.2%, in the world's top five market share of 34.7%, compared with FY2021 month-on-month increase 1.2pct. Among them, Vuse's market share in the United States increased by 3.8pct to 36.3% compared with FY2021, surpassing JUUL to rank first. Vuse's series of products SOLO, VIBE and CIRO have been licensed by PMTA, while JUUL products were rejected by PMTA on June 23, and the market share of compliance products is expected to further increase. Smoore International Holdings Limited and customer British American Tobacco PLC are expected to benefit directly. At present, FDA has examined 23 e-cigarette products, belonging to Vuse, Logic, NJOY three brands, of which Logic and NJOY are all manufactured by Smoore International Holdings Limited (NJOYAce directly uses FEELM ceramic atomization core). Smoore International Holdings Limited's strong R & D capability and compliance capability and product hazard reduction effect have been verified by FDA. We are optimistic about the follow-up review of VuseAlto, the core customer product of Si Moore OEM. The demand for new overseas tobacco continues to grow, and Seymour's overseas orders are expected to increase.

Investment advice: JUUL is banned by FDA in the United States, the overseas competition landscape has changed more than expected, and the market share is expected to be grabbed by other leading brands approved by PMTA, and the global atomization technology leader Smoore International Holdings Limited is expected to benefit. Smoore International Holdings Limited has a leading technical strength and obvious advantages in customer resources. with subsidiaries winning production licenses one after another, long-term growth can still be expected. Considering that domestic policy is still in progress and the repeated impact of the COVID-19 epidemic, we expect Smoore International Holdings Limited's operating income from 2022 to 2024 to be 134.15, 164.76 and 19.879 billion yuan, an increase of-2.47%, 22.81% and 20.66% over the same period last year. The adjusted net profit was 39.32,46.89 and 5.552 billion yuan, up-27.76%, 19.25% and 18.40% over the same period last year, corresponding to PE 23.4x, 19.8x and 16.6x, maintaining the investment rating of Buy-A.

Risk hints: the risk that the industry regulation is more stringent than expected; the risk that the path of atomization technology is subverted; the repeated risk of local epidemic; the lower-than-expected risk of new business development; the risk of reduction by major shareholders; and the risk of unaudited OEM products.