RELX Operating Company Fogcore Technology Successfully Listed on the NYSE

Recently, the news of RELX's main operating entity, Fogcore Technology, successfully listing on the New York Stock Exchange has become the most关注的 news in the financial sector. Despite stricter regulations and heavy pressures, Fogcore Technology's stock soared 14.5% on the first day of trading, with an intraday high of over 158%, closing with a market value of $45.8 billion.<\/p>

Do you think it ends there? This is just the "opening dance" that capital pursues. RELX's listing on the US stock market and the strong rise in stock prices have also invigorated the concept stocks of e-cigarettes in the A-share market. For example, after the opening on January 25, the stock price of Ai Pu rose sharply, hitting a strong limit, while the stock prices of Aide and Yongji reached consecutive limits. However, when stock prices are influenced by e-cigarettes, their performance has shown strong results. The madness of capital is evident.<\/p>

However, during this capital frenzy, we need to calm down and rationally think about the future development of [RELX] in the e-cigarette industry.<\/p>

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Where do e-cigarettes come from? Where are they going? <\/p>

E-cigarettes are electronic products that mimic traditional cigarettes. By imitating the appearance, smoke, taste, and feel of cigarettes, they can achieve a similar "addiction relief" to traditional cigarettes. The working principle is to use a rechargeable battery to drive atomization. By using e-liquid containing nicotine in a heated tank, it turns into vapor.<\/p>

The original purpose of e-cigarettes was to reduce the harm caused by tobacco to the health of long-term smokers, but this is precisely because people generally believe that "e-cigarettes are less harmful than traditional cigarettes" that, in the past two years, along with the more diverse flavors of e-cigarettes, many young people have enthusiastically tried vaping.<\/p>

The change in application scenarios has greatly altered the imagination of demand. In 2019, there were about 287 million smokers in China, making it the largest tobacco user market in the world, but there were only 3.4 million e-cigarette users, with a penetration rate of 1.2%. In contrast, the penetration rate in Europe and the United States exceeds 30%, indicating that the market has vast potential.<\/p>

However, it is important to note that China's tobacco industry is the largest tax contributor, and its control is very strict. In November 2019, the National Tobacco Administration and relevant departments issued new regulations requiring e-cigarette production and sales companies and individuals to shut down their e-cigarette internet sales websites or customers, completely prohibiting online marketing.<\/p>

From the introduction of new regulations, we can derive two risk points for the future development of the e-cigarette industry: one is whether to rely on cheap online marketing to continue maintaining wild growth, and the other is the policy risks brought about by future changes in e-cigarette taxation. Considering these two points, the future of the e-cigarette industry will bid farewell to the chaotic situation of the sand industry, and leading companies that truly master technological advantages will remain strong and achieve stable, healthy development.<\/p>

Why should RELX be the first to list? <\/p>

Unlike the new energy vehicle industry, which relies on high growth imagination to enhance its valuation, the e-cigarette industry is indeed a "cash cow." According to RELX's prospectus, this was the first investment in 2018. Within a year, RELX and its pods achieved sales of 500,000 and 5.9 million, respectively. In the same year, revenue reached 133 million yuan, with a gross profit of 59.24 million yuan. These two figures jumped to 1.549 billion yuan and a gross profit of 800 million yuan in 2019. By the first three quarters of 2020, RELX had achieved revenue of 2.21 billion yuan and a gross profit of 833 million yuan.<\/p>

Roughly calculated, a gross profit margin close to 40% is already quite objective. If we mention the 75% gross profit margin that traditional tobacco and international e-cigarette giant JUUL can achieve, then China's e-cigarette industry still has a large profit space.<\/p>

It is precisely under the existing market space and broad expectations for profitability that the e-cigarette startup attracted a large number of entrepreneurs, including YOOZ e-cigarettes from Guizhou Xingyi, as well as internet figures like Luo Yonghao and Wang Ying, the founder of RELX, who was once a manager at Uber China. This deep internet gene has also given RELX a unique competitive advantage in online marketing, helping it quickly rely on platforms like Taobao and JD.com in the early market.<\/p>

However, these advantages disappeared as new regulations for e-cigarettes began. After November 19, the entire e-cigarette industry was completely eliminated, and the industry is looking forward to new channel models.<\/p>

Regarding RELX, after learning from painful experiences, it resolutely decided to move its business offline. Its latest initiative is the recent opening of its first flagship store in Shanghai, and RELX plans to invest 600 million yuan to open 10,000 stores in the next three years, covering many convenience stores, bars, and internet cafes.<\/p>

RELX chooses to focus on channel marketing and has created rapid revenue and profit growth. The capital market has also taken this opportunity to publicly issue stocks to see the e-cigarette industry's ability to make money again.<\/p>

Where is the road? Who will be the next "disruptor"? <\/p>

RELX's wealth story seems to have come to a perfect end. However, upon careful consideration, you will find an undeniable issue. The sudden increase in costs brought about by online transfers has consumed most of RELX's profits. In addition, it has adopted a light asset OEM production model, even saying that in e-cigarettes, the highest repurchase rate of e-liquids comes from external procurement. In the future, if RELX wants to achieve a solid industry leader position, it must make up for the shortcomings of the industrial chain.<\/p>

True disruptors will continue to "disrupt themselves," and those who survive will often be the "seekers of change." The future of the e-cigarette industry will still be dominated by a few companies with technological advantages. The overall direction of product quality and safety will also align with the regulatory requirements for e-cigarettes.<\/p>

Disruptors are already there, but they are not moving at the right pace. Another representative company in the e-cigarette industry, Platinum Derby, was established five years ago in the morning. It was founded in 2013. At that time, the marketing strategy for the smoking cessation market did not improve, but it spent a lot of time overcoming technical difficulties, including from e-liquids to hardware, and the core technology research and development of BDO was completed entirely by itself, thus neglecting the equally important importance of marketing channels, allowing RELX to catch up.<\/p>

However, with the revival of the industry, online marketing for e-cigarettes has been completely blocked, and technology-based Bode has welcomed a second opportunity. A few days ago, it was reported that the three types of hardware and six models of e-liquids developed by Platinum have passed the second round of review by the FDA, which means that Platinum's PMTA (Premarket Tobacco Application) has officially entered the substantive scientific review stage, making it the only Chinese e-cigarette company to reach this stage.<\/p>

The entire industrial chain model developed by BOD is a strong "moat" established. After the merger, BOD's pod gross profit margin is 24% higher than the gross profit margin omitted in RELX's prospectus. Moreover, according to BOD insiders, BOD's pod repurchase rate is the highest in the industry, recognized as the king of repurchase in the industry, with the highest ratio of cigarettes to sticks.<\/p>

Although the technological advantage has spent a lot of effort in the early stage, it has also achieved the production capacity of the entire industrial chain of BOD. However, this advantage cannot be achieved overnight. The ideal scenario is that BOD can realize the myth of high gross profit of enterprises in the international market.<\/p>

BOD's other competitive advantage lies in its brand value. It adheres to the concepts of purity, safety, and health, and only conducts business with smokers. The corporate values do not allow them to enjoy the benefits brought by rapid growth in the internet era. But this allows them to indulge in technology while building their own reputation.<\/p>

As long as the tree does not grow to the sky, there will be new stories in the e-cigarette market after returning to the cause.<\/p>