Three subsidiaries were granted tobacco monopoly production licenses, and production and operation were carried out in an orderly manner. Smoore International Holdings Limited issued an announcement on August 3, 2022, following the tobacco monopoly production enterprise license issued by its wholly-owned subsidiary Shenzhen Weipri Technology Co., Ltd. on July 21, 2022. Shenzhen McWeill Technology Co., Ltd. and Shenzhen McBrothers Technology Co., Ltd., two wholly-owned subsidiaries, were granted tobacco monopoly production licenses on August 3, 2022, with a validity period from July 25, 2022 to July 31, 2023. We estimate that the EPS of 2022max 2023max in 2024 will be RMB 0.68max 0.84max 1.03. Referring to comparable company Wind's average of 30 times PE for 22 years, and considering the company's deep barriers, the company is given a 22-year 37 times target PE, a target price of HK $29.23, and a "buy" rating.
Domestic: production licenses are issued in an orderly manner, benefiting from the optimization of the market pattern for a long time. E-cigarette production licenses are issued in an orderly manner. According to the data of the State Tobacco Monopoly Bureau, as of July 30, more than 131 e-cigarette-related enterprises have been granted tobacco monopoly production enterprise licenses, of which 11 e-cigarette brands have obtained production licenses for brand licensing, including Smoore International Holdings Limited downstream customers Yueke and MOTI. Among them, Yueke's annual production quota is 328.7 million cigarette cartridges, 15.05 million cigarette sticks and 6.1 million disposable e-cigarettes. We believe that the capacity approval quota is relatively abundant, and the production quota is expected to be concentrated to the leading manufacturers with the advantage of scale. With the successive approval of subsidiary production licenses, the company's overall production and operation will proceed as planned. In the long run, under the standardized management of the industry, the domestic competition pattern is further clarified, and the company's market share is expected to increase steadily.
Overseas: major customers have reviewed PMTA,BAT 's new tobacco revenue increase overseas, British American Tobacco PLC's three Vuse products solo, ciro, and vibe have passed the PMTA audit, while the second largest brand in the US e-cigarette market, Juul (Vuse's biggest competitor), is still uncertain whether it can pass the audit. As a Vuse cooperative manufacturer, the company is expected to benefit from a reshuffle in overseas markets.
In addition, British American Tobacco PLC 22H1 reported that its new tobacco product revenue of 1.283 billion pounds, + 45.4% year-on-year, revenue share increased from 8.0% in 2021 to 10.0%. As of 22H1, the number of new tobacco users reached 20.4 million, an increase of 2.1 million over the end of 2021. Vuse's market share in the core market (excluding one-time) is 49.8% higher than that of + 6.7pct in 2021. The demand for new overseas tobacco is growing steadily, and the expansion of major customers and market share is conducive to the growth of demand for electronic atomization equipment.
The world leader of atomization equipment, maintaining the "buy" rating
We maintain the profit forecast and estimate that the net profit of 2022, 2023, and 2024 will be 40.86, 50.21, and 6.199 million, respectively, and the corresponding EPS will be 0.68, 0.84 and 1.03 respectively. Referring to the average of 30 times PE expected by comparable company Wind in 22 years, and considering the high barriers of the company, the company is given 37 times target PE in 22 years, with a target price of HK $29.23 (the previous value is HK $30.02), maintaining a "buy" rating.
Risk hint: industry policy tightens and industry competition intensifies.