From 2016 to 2020, the global retail sales of atomized e-cigarettes have a CAGR of 25.2%, which is much higher than the CAGR of 2.7% of the retail sales of combustible traditional cigarettes. The e-cigarette market is growing rapidly, and it is gradually realizing the process of replacing traditional tobacco products with harm-reducing tobacco products. In terms of market share, as of 2019, the main body of the global e-cigarette market is still the US market, with market sales accounting for 48%, followed by the United Kingdom and France, accounting for 8% and 6%, respectively. More than 70% of the world’s e-cigarette products are produced and exported in Shenzhen, China, but China’s e-cigarette market share is only 5%, and there is broad room for development.
The portraits of e-cigarette users are mostly young
According to Blue Hole’s new consumption survey data, the e-cigarette democracies in 2020 are young people aged 18-35, accounting for 66%. Compared with the overall smokers in China, the proportion of female e-cigarette smokers in China is relatively high, reaching 27%, and the main e-cigarette users are younger; in terms of consumer concerns, quality doubts account for 39.3%, ranking first. We believe that with the gradual implementation of my country’s follow-up vaping e-cigarette regulatory rules, industry entry barriers will be greatly increased, and “small and disorderly” enterprises will gradually withdraw from the market, further driving the standardized, healthy and sustainable development of the e-cigarette industry.
E-cigarettes meet consumer demand for harm reduction, and the development of new types of tobacco is the general trend
In 2014, a paper published in “Tobacco Control” proved that: some toxic components in the smoke of e-cigarettes are significantly lower than that of traditional cigarette smoke, with a gap of 9-450 times; the results of a study by the US Centers for Disease Control and Prevention in 2019 indicate that: compared to people who do not smoke at all , Traditional cigarette users have a 165% higher risk of heart disease and a 95% higher risk of coronary heart disease, while the data for e-cigarette users are 56% and 10%, respectively. If traditional cigarette users change from smoking cigarettes to electronic Smoke can reduce the incidence of related diseases. The number of smokers in China ranks first in the world. In 2020, the number of smokers is 365 million, accounting for 1/3 of the total number of smokers in the world. At the same time, China is the world’s largest consumer and producer of tobacco. In recent years, affected by factors such as tobacco control policies, taxation policies, and increasing people’s health awareness, the global tobacco industry market has been sluggish, with a CAGR of -2% from 2013 to 2020. We believe that based on the performance of overseas tobacco giants’ new tobacco business in recent years, it can be seen that new tobacco has become an important transformation and layout direction for major companies. As my country’s atomized e-cigarette regulatory rules are gradually implemented, it will effectively push the market up. Industry thresholds, increase industry concentration, and favor upstream and downstream leading enterprises in the industry with formalized management and product quality compliance.
Investment Advice:
1） HNB industry chain: key recommendation-Huabao International/Shares （domestic tobacco flavor leader, the only private license for new flakes） [co-covered with food and beverage team], Jinjia shares （domestic tobacco label leader, and Yunnan China Tobacco only Strategic cooperation with private enterprises） [joint coverage with the light industry team]; Suggested attention: Jiyou, Shunhao, Dongfeng [light industry team coverage], China Tobacco Hong Kong, China Bolton.
2） Atomization industry chain: Key recommendation-Smol International （the leading manufacturer of atomization equipment in the world）， followed by Fogcore Technology （the leading domestic atomization brand）， and Ai Shide （the leading domestic atomization channel）。
Risk warning: the risk of new tobacco policy changes, sales/enterprise development less than expected, and the risk of intensified market competition.