Tobacco Consumption Tax Adjusted, E-Cigarette Concept Stocks Benefit

According to a notice recently issued by the Ministry of Finance, starting May 10, the ad valorem tax rate at the cigarette wholesale stage will be raised from 5% to 11%, and an additional specific tax of RMB 0.005 per cigarette will be levied. This is China’s first adjustment to tobacco consumption tax in six years since May 2009.

Analysts believe that this substantial tax increase will significantly boost China’s tobacco consumption tax revenue while also raising cigarette retail prices. This will help curb cigarette consumption, increase fiscal revenue, and ease pressure on the balance of income and expenditures. In addition, it is also considered a major positive for listed e-cigarette-related companies.

Among A-share listed companies, EVE Energy is currently a leading domestic producer of batteries for vaping devices; Shanghai Lvxin and Dongfeng Shares, together with Longgongyun, have jointly funded a joint venture to enter the e-cigarette business; and Jinjia Shares has also confirmed on an investor interaction platform that the company has established a dedicated team to study e-cigarettes.