Who Is Most Qualified to Challenge RELX’s 250 Billion Valuation? RELX Continues to Dominate the Mark

At the beginning of 2021, the domestic e-cigarette track has ushered in collective agitation, and it is Wuxin Technology, the parent company of e-cigarette brand RELX Yueshe, who has brought this wave of surge.（RLX）US stocks are listed.

On its first day of listing, Fog Core Technology closed up 145.9%, soaring directly to US$45.8 billion(About nearly 300 billion yuan), today has a market value of US$39 billion(About 250 billion RMB)Up and down. This is once again the e-cigarette industry has been sought after by the capital market after Simore International, the world's largest manufacturer of electronic atomization equipment, went public and had a market value of more than 400 billion Hong Kong dollars.

According to CIC（China Insights Consultancy）Report that by 2023, China's e-cigarette market is expected to reach US$11.3 billion, with a compound growth rate of 65.9% since 2019. In 2019, there were 286.7 million traditional smokers in China, with a potential market size of the industry of 112.9 billion yuan. This means that China's e-cigarette industry has considerable future development space and is an absolute high-potential track. Or for the above reasons, the e-cigarette industry has always been favored by the capital market.

In the past two years, affected by the domestic online sales ban and the impact of the COVID-19 epidemic, the number of active e-cigarette brands nationwide has decreased by 90%. The industry has begun to concentrate on leading brands such as Yueshi and MOTI Magic Flute, and the competitive landscape has become increasingly clear. After the introduction of the de-Internet regulatory policy, online channels returned to zero, and offline channels became a battleground for all brands.# p#pagination title #e#

The Yueshi prospectus shows that offline store expansion will still be the highlight of its 2021. Different from the offline battle in 2019 that relied solely on the barbaric growth of capital, in today's market environment, the comprehensive requirements of e-cigarette brands are getting higher and higher, and the layout of capital, products, technology, upstream supply chains, and even downstream marketing networks are indispensable. Although it has been listed, 2021 is also a year full of opportunities and challenges for Yueshi. For the e-cigarette industry, there are still many suspense that need to be revealed.

Channel terminal, can Yueshi break the second place?

Financial reports for the first three quarters of 2020 show that Yueyai has nearly 5000 terminal stores, which will reach 20000 in 2021.Information from multiple channels shows that in 2021, MOTI Magic Flute, which follows Yueshi, will continue to increase store opening subsidies and open 10,000 new stores with a subsidy of 1 billion yuan.In addition, different echelon brands have also launched the latest store opening subsidy policies, preparing to fully expand offline. Industry insiders expect that leading brands such as Yueshi and MOTI Magic Flute will collectively account for 70% of the domestic market in terms of the number of terminal stores, and Yueshi will lead slightly in terminal stores.

As far as terminals are concerned, in addition to the number of stores, store retail sales and brand image are more important factors. Industry insiders revealed that the brand image and business district determine the retail sales of stores. At present, with various brands adding terminals at a high speed, the store image and the criteria for selecting business districts have been reduced accordingly. Many brands have opened community stores decorated by the shop owners themselves. Due to low rent thresholds, low decoration standards, shop owners and salespeople, although the business volume is not high, they are still profitable and continue to operate. The advantage of this business model is that the number of store terminals is growing rapidly and can affect consumers quickly. The disadvantage is that the brand image has been weakened. Although it has occupied the minds of consumers, it has not established a high-end brand image.# p#pagination title #e#

While maintaining the brand image and expanding rapidly, how can we have it both?After in-depth understanding of various brands, we found that on the one hand, MOTI Magic Flute requires the high-quality of terminals, claiming that stores have settled in more than 90% of S-class business districts. On the other hand, it has delivered outstanding data on the number of stores. In 2020, it announced that it had opened 2841 stores.

In contrast, Yuexie is more leading in the development of the number of stores. The financial report shows that in the first three quarters of 2020 alone, Yueshi opened 5000 brand stores and 100,000 sales outlets, covering 250 cities. Although Yue Shi's 2020 annual report has not yet been made public, insiders pointed out that it has opened more than 9000 specialty stores in 2020.

In the rapidly developing e-cigarette terminal battlefield, each brand has its own path, and the vastness and rapid extension of the track also gives them their own development space. Which is more important, terminal quality or quantity, may take time to prove.

#p#Pagination Title #e#Who is Yueshi's strongest challenger?

In the prospectus, Yueshi regards the brand-brand building on the market side, consumer education, and currently the largest number of terminals-as its core competitive advantages.

Since Ruyan commercialized e-cigarettes in 2004, more than a dozen large-scale technological revolutions have occurred in the industry in the past ten years, each time changing the brand ranking of the entire industry. Many brands that occupied an absolute leading position at that time experienced a decline in share as the changes took place, just like Ruyan in those days.

According to industry insiders, at present, few domestic leading brands can achieve key technological breakthroughs and product iterative upgrades. The product lines are too single, mainly focusing on replacement atomizing e-cigarettes. Most of them are limited to changes in the color or appearance of the tobacco rods, and it is a little difficult on the road to innovation. Therefore, taking products as the core driving force and relying on the product matrix will be the core competitive barrier for the next challenger and the biggest advantage in breaking the game.

Through investigating the terminal channels of major brands, we found that:In terms of product definition and extension, different head brands use different paths.

Yuexi adopts the method of joint development of multiple product lines with head suppliers, RELX 1 generation and 4 generation, each using different atomization bomb structure. Thanks to Yuexie's advantages in marketing and terminals, these two products have always been the highest-selling products on the market.# p#pagination title #e#

andMOTI Magic Flute adopts the strategy of continuously introducing the latest technology in the industry and upgrading the mainframe and smoke bombs.The popular products MOTI S LITE and MOTI C launched in 2020, since the mainframe is produced by the brand's wholly-owned factory, directly introduced the MCU frequency conversion chip developed by the brand at that time and the patented surge mode to control temperature through curve heating to enhance the taste experience. According to the brand's external publicity, these two products, which claim to pursue the "ultimate experience", have directly won high praise from the industry's authoritative evaluation media, industry KOL and C-end users due to the introduction of the latest technology of the current period.

On the premise that there have been no major technological changes in the replacement atomizer from 2018 to 2021, both brands have achieved considerable growth. The technological change of e-cigarettes is expected to be coming soon. Brands that have agility in the latest technology and can be quickly applied in the supply chain deserve better growth.

How will the industry landscape evolve?

Since the e-cigarette industry became a hot spot, many small and scattered brands have entered the market, resulting in chaotic prices, goods fleeing, mixed products, chaotic stores, and many complaints from dealers and consumers. With the implementation of domestic e-cigarette regulatory measures, the threshold for entering the market has generally increased, and the industry landscape is destined to undergo tremendous changes.# p#pagination title #e#

Can a small team with only a sales team or a dozen people continue to survive? Are all e-cigarette brands not equipped with product research and development capabilities and core technologies are in the external supply chain? Will manufacturers and brands be integrated in the future?

As the market's requirements for e-cigarette brands continue to increase, Xiaosan brands are destined to be unable to meet the development of the market.This means that the industry is moving from the stage of a large number of small and scattered brands to the stage of positional warfare for leading brands. To truly become a leading brand, capital, products, technology, upstream supply chain, and downstream marketing network layout are all indispensable.

The prospectus shows that Yue Ke follows a brand-driven business model, cooperates deeply with Simmore International in manufacturing, supports stores through products and systems, and serves consumers. For now, Yueshi has received the best funding and supplier resources in the industry.

Also in in-depth cooperation with Simmore International, the main focus on FEELM atomizing cores is MOTI Magic Flute.Information from investor channels shows that MOTI Magic Flute leads the industry in terms of sales, funds and channel quality, as well as product development and new technology introduction, with its main products as the core driver.

As for other e-cigarette companies, there is a large gap between the top brands in terms of size and number of terminals, but each brand is striving to establish its own competitive advantage.# p#pagination title #e#

After market reshuffle and industry changes in the past few years, it will become increasingly difficult for new brands to enter the electronics industry, and it will become increasingly difficult to gain advantages. It is not ruled out that new brands can enter the first echelon, but they must also have competitive advantages or find differentiated advantages.

E-cigarettes are a long-term track, and the market structure must be diversified. However, only those who truly have capital scale and core technologies can gain a firm foothold in national regulatory policies, industry reshuffle, and market competition, achieve sustainable development, and seize greater market space.