First-half profit up 40 times? E-cigarettes boost a company valued at over RMB 2 billion

Recently, some noteworthy news has emerged: one company’s e-cigarette business made an outstanding contribution, with expected first-half net profit rising more than 40-fold year on year, while its e-cigarette business generated more than RMB 200 million in revenue in just six months. The company explicitly stated that “the increase in net profit was mainly due to the e-cigarette segment making an outstanding contribution to the group’s gross profit.”

This company is JIAYAO Holdings, which has a market value as high as RMB 2.57 billion.      

According to available information, the company’s e-cigarette business accounted for more than 20% of revenue in the first half of this year. This segment generated revenue of RMB 217 million, or about 22.4% of its total revenue. In the first half of 2023, it recorded net profit after tax of approximately RMB 29 million to RMB 31.5 million. The increase in net profit after tax was mainly due to the e-cigarette segment’s outstanding contribution to the group’s gross profit, achieving rapid growth and relatively high margins in the first half of 2023. The group expects net profit after tax of approximately RMB 29 million to RMB 31.5 million for the first half of 2023, compared with about RMB 700,000 in the same period of 2022.

(Remarkable returns)

On closer inspection, the company invested in an e-cigarette brand company at the end of 2021. It entered into an investment cooperation agreement with Shenzhen Haohanyangtian Technology Co., Ltd. (a licensed e-cigarette company), subscribing to RMB 14 million in newly increased registered capital in the target company and acquiring a 70% stake.

(The investment made that year)

Haohanyangtian Technology was founded in 2013 and also produces disposables.

Zhan Xingyu, general manager of Shenzhen Haohanyangtian Technology Co., Ltd., once said, “Shenzhen has a complete e-cigarette supply chain, which is very difficult to build overseas. Without that supply chain, relying on shipping from China would increase overall production costs. At present, China’s talent pool and core technologies are very difficult to replace.”

This shows that Shenzhen is leveraging its supply chain advantages to strengthen its edge in expanding overseas while also seizing the opportunity.

Finally, it is worth noting that among currently listed companies, quite a few have invested in e-cigarette companies and gained earnings growth from those investments. Especially amid the current trend of going global, e-vapor products are creating new opportunities for companies worldwide, particularly manufacturing opportunities and order opportunities across every part of the supply chain.