Inside SKE: Q1 net profit surpasses 100 million yuan, exceeding full-year 2022 and breaking into the

The quarterly report from the listed company Yinghe Technology highlights the strong performance of SKE in the first quarter. Last year, SKE's net profit was 85.3578 million yuan, but just in this year's first quarter, it has already surpassed last year's total.

On April 25, Yinghe Technology released its Q1 2023 report, showing revenue of 1.738 billion yuan, a year-on-year increase of 11.90%, net profit of 103 million yuan, a year-on-year increase of 59.69%, and net profit after deducting non-recurring items of 79.603 million yuan, a year-on-year increase of 19.47%. The net profit attributable to the parent company was 103 million yuan, a year-on-year increase of 59.69%, with minority shareholders' profit and loss at 50.8953 million yuan, attributed to "increased profitability of some subsidiaries."

The performance of the quarterly report quickly reflected in the stock price; as of April 26, Yinghe Technology closed at 18.21 yuan, up 6.49%, with a turnover rate of 3.16% and a trading volume of 165,600 hands, totaling 299 million yuan.

In fact, after the release of SKE's quarterly report, many investors have turned their attention to its controlling subsidiary, SKE. For example, on the Xueqiu platform, there has been a lot of analysis regarding SKE's performance. Some have highlighted that SKE contributed a profit of 50.89 million, and Yinghe Technology made a wise investment, acquiring 51% of the shares for only 48 million.

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Some have estimated that SKE's profit in the first quarter is 100 million, and the net profit for a single quarter is expected to exceed last year's total of 85 million. Some even complained that the main business is hardly profitable, with e-cigarettes and subsidies becoming important parts of profitability:

In summary, we can conclude that on one hand, the profit contributed by SKE is a highlight in Yinghe Technology's quarterly report; on the other hand, SKE has experienced a surge in performance in the first quarter.

It is necessary to add some background about SKE and Yinghe Technology.

First, SKE is considered an established e-cigarette company. According to Tianyancha information, SKE was established in 2013 and is a member of the Shanghai Electric Holding Group (originating from Yinghe Technology's acquisition of 51% of its shares, as mentioned below). Yinghe Technology announced on September 21, 2022, that it had received a tobacco monopoly production enterprise license. In recent years, SKE has focused on the overseas disposable market, with the brand SKE Crystal.

Secondly, SKE is a controlling subsidiary of Yinghe Technology. In November 2018, Yinghe Technology acquired 51% of Shenzhen SKE Technology Co., Ltd. for an investment of 48.27 million yuan, making SKE a controlling subsidiary of Yinghe Technology. Based on Yinghe Technology's financial report data and shareholding information, the aforementioned Xueqiu investors estimated that SKE's net profit in the first quarter may exceed 100 million.

Third, SKE's performance in the first quarter is extremely impressive. A reference data point is that on March 28, Yinghe Technology released an announcement regarding the performance commitment of Shenzhen SKE Technology Co., Ltd. for 2022, which mentioned that SKE achieved a net profit of 85.3578 million yuan in 2022. In other words, in the first quarter of this year, SKE's net profit has already surpassed that of the entire year of 2022.

This data seems to confirm that SKE has achieved a surge in net profit, but what is the reason behind it? Data indicates that the reason can almost certainly be attributed to a surge in sales. This is fully reflected in the sales ranking.

British authoritative media Financial Times has cited research agency data twice this year to rank disposable brands in the UK by sales. As of January 2023, SKE's brand SKE Crystal was ranked seventh: #p#分页标题#e#

By early April 2023, according to sales ranking, SKE Crystal has risen to fourth place in sales, following Elf Bar/LOSTMARY, Elux, and British American Tobacco's Vuse Go.

In other words, in the UK market in the first quarter of this year, SKE's disposable brand SKE Crystal has surpassed brands like IVG and Geek Bar, establishing a significant lead and securing the TOP4 position.

Why is SKE's surge worth noting? On one hand, its expansion into the European market has not been very long. In Yinghe Technology's announcement, it explained the reasons for SKE's failure to meet its performance commitments in 2022, mentioning that SKE focused on overseas markets in the first half of 2022 and obtained TPD in June, resulting in underwhelming performance in the first half of the year:

On the other hand, the UK market in the first quarter was actually filled with uncertainties. The most well-known incident was first reported by the Daily Mail regarding the “overfilled oil” controversy; subsequently, British American Tobacco “assisted” by sending the test results indicating that “almost all non-tobacco company disposables were overfilled” to regulatory authorities and partners, causing most brands to be embroiled in the issue.

At that time, SKE was also affected; according to reports from UK retail media, on April 12, British wholesaler Booker issued a recall notice for SKE Crystal, involving 20mg products of ten flavors, and SKE seemed to be at risk of being taken off the shelves.

However, this incident was quickly confirmed to have little impact; UK retail media cited industry insiders stating that SKE Crystal is expected to resume soon, and ELFBAR/LOSTMARY will also restore supply.

Just a week later, this news was confirmed. On April 20, Yinghe Technology responded to investor inquiries on its investor relations platform, stating: “Hello, the e-cigarette business of our subsidiary SKE is developing well in the UK. Thank you for your attention!”

Based on public information analysis, SKE's rapid response is likely related to its increased investment in the UK market. According to Yinghe Technology's announcement on March 28 regarding the establishment of a wholly-owned subsidiary in the UK, SKE will set up a wholly-owned subsidiary in Manchester, UK, focusing on the sales, consulting, and after-sales support of e-cigarettes.

Note the timing; the UK wholesaler issued a recall notice on April 12, while Yinghe Technology announced the establishment of SKE's wholly-owned subsidiary in the UK on March 28, indicating that SKE had already strengthened its investment in the UK market before the recall.

In fact, SKE's quick response has more clues to uncover. As early as March 17, when UK retail media reported British American Tobacco's “whistleblowing” to regulatory authorities and partners regarding the overfilled oil incident, Mihai Lambert, representing SKE, stated that the test results for the SKE Crystal series do not represent their (on-sale) actual products.

It can be reasonably speculated that shortly after the Daily Mail reported the overfilled oil issue with disposable e-cigarettes in the UK on February 6, SKE may have already planned to take relevant measures, allowing for a quick recovery of supply even after a recall.

From another perspective, part of the reason may also be that compared to competitors, SKE's response was quicker, significantly reducing the impact of recalls and removals, enabling it to achieve a turnaround in the gradually maturing UK market.

Does the surge in the first quarter indicate that SKE has entered a new phase of rapid growth in the UK market? Will the market landscape in the UK change in the future? We will continue to monitor consumer behavior.