Just now! The stock price hit a new high, with Smoore International surging 12%. Is the king of e-cigarettes making a comeback?

On June 24, the leading e-cigarette company $SMOORE INTL(06969.HK) surged over 12% at the opening with heavy trading volume, hitting a high of HKD 10.52, the highest level since April 2023. As of press time, the company's stock was up 6.3% at HKD 9.96 per share, with a market capitalization of HKD 61.153 billion.

On the news front, the U.S. Food and Drug Administration (FDA) recently approved the first batch of menthol-flavored e-cigarettes, allowing them to be sold in the U.S. The four approved products are all from NJOY, including two NJOY ACE products and two NJOY DAILY products.

This marks the recognition of the harm reduction potential of e-cigarette products, and this positive market development has directly driven the rise in SMOORE's stock price.

E-cigarettes, as a consumer product alternative to traditional cigarettes, were originally expected to reduce the health damage caused by smoking. In the early stages of development, the industry was thriving. However, as e-cigarettes became more popular, concerns about the potential health risks posed by harmful substances such as nicotine, formaldehyde, and propylene glycol in e-cigarette liquids gradually emerged. In recent years, governments around the world have launched waves of "e-cigarette bans" to protect public health.

As domestic and international regulations on e-cigarettes have become increasingly stringent, the e-cigarette industry has faced pressure. As the world's largest e-cigarette OEM manufacturer, SMOORE has seen its performance decline amid changing policies, a continuous drop in e-cigarette demand, and intensifying market competition. Despite actively seeking new orders in overseas markets to break through development bottlenecks, its performance has still been unavoidably affected.

In 2023, SMOORE's revenue was RMB 11.168 billion, down 8.04% year-on-year; net profit attributable to shareholders was RMB 1.645 billion, plummeting 34.47% year-on-year. The decline in performance was mainly due to a significant drop in revenue from mainland China, while steady growth in overseas market revenue was insufficient to offset the impact.

However, as the FDA's regulatory direction becomes clearer, future efforts will focus on strengthening oversight of non-compliant products, benefiting the market share of compliant products. As the industry leader, SMOORE's development prospects are highly regarded by many institutions.

Caitong Securities pointed out that the FDA's authorization of four menthol-flavored e-cigarettes under NJOY for sale in the U.S. marks the first time it has approved flavored e-cigarettes other than tobacco flavors for sale in the country. The FDA believes there is sufficient evidence that the authorized menthol e-cigarettes help reduce exposure to harmful chemicals in traditional cigarettes, demonstrating harm reduction potential. The benefits of completely switching from traditional cigarettes to less harmful products may outweigh the potential risks to youth.

The firm emphasized that the harm reduction potential of NJOY's menthol-flavored e-cigarettes has been recognized, and menthol products from other brands are expected to be approved in succession. Meanwhile, the FDA will increase scrutiny of non-compliant disposable e-cigarettes. Compliant disposable and pod-based products (with a high proportion of menthol flavors) may usher in new opportunities. Attention should be paid to SMOORE, the global leader in e-cigarette OEM manufacturing, as all four authorized products are manufactured by SMOORE.

Guotai Junan Securities also noted that the FDA's approval of the first batch of menthol-flavored e-cigarettes is of great significance to the industry, potentially providing guidance for future approvals and boosting industry confidence. According to the CDC, menthol-flavored products accounted for about 30% of U.S. e-cigarette shipments in 2023 and about 50% of pod-based product shipments, making them a key category in the U.S. market. Looking ahead, products from leading brands with strong compliance capabilities are expected to gradually pass the application process. As PMTA review standards become clearer, approvals may accelerate, leading to stronger enforcement and the accelerated exit of non-compliant products, restoring a healthy competitive landscape.

The firm added that SMOORE is closely tied to leading compliant tobacco companies such as British American Tobacco (Vuse) and NJOY, with outstanding R&D capabilities. Vuse Vibe and Vuse Sole tobacco flavors have already passed PMTA certification, and menthol products are expected to follow. As a core manufacturer, SMOORE is poised to benefit significantly.

Author: Bottle