Leading Vaping Companies Release Interim Reports: Revenue and Profit Both Fall as Industry Remains i

On the evening of August 21, Smoore International released its performance report for the first half of 2023. Not long ago, another well-known company in the e-cigarette industry, Smoore Technology, also disclosed its performance report for the first half of the year. Overall, the e-cigarette industry is still in a period of pain in the first half of this year.

Regarding the overall performance of e-cigarette listed companies in the first half of this year, Ma Weimin, founder of Ge Wu Consumer, told the Securities Daily that due to market influences, the overall performance of listed companies in the e-cigarette industry has declined. However, companies primarily targeting the B market, with technological reserves and their own industrial chains, have shown stronger risk resistance.

Revenue and Profit Both Decline

The announcement shows that Smoore International's operating income for the first half of 2023 was 5.123 billion yuan, a decrease of 9.4% year-on-year. Specifically, in the first half of this year, Smoore International's sales to enterprise customers amounted to 4.474 billion yuan, a year-on-year decrease of 12.2%, with sales in the U.S. region amounting to 2.06 billion yuan, a year-on-year increase of 27.7%, and sales in mainland China amounting to 62.087 million yuan, a year-on-year decrease of 96.3%. During the same period, Smoore International achieved retail sales of 649 million yuan, a year-on-year increase of 15.8%, with sales in the U.S. region amounting to 155 million yuan, a year-on-year increase of 16.7%, and sales in Europe and other regions amounting to 494 million yuan, a year-on-year increase of 15.5%.

In the first half of this year, Smoore International's profit was 717 million yuan, a year-on-year decrease of 48.2%; the adjusted net profit margin was 14.8%, a year-on-year decrease of 10.6 percentage points. Gross profit was 1.855 billion yuan, a year-on-year decrease of 31.4%, and the gross profit margin fell from 47.9% in the same period last year to 36.2%. Smoore International stated that the decline in gross profit margin was mainly due to the decrease in revenue from the relatively high gross profit margin market in mainland China, which accounted for a declining proportion of the group's overall business; while revenue from lower gross profit margin disposable e-cigarette products saw significant growth, accounting for an increasing proportion of the group's overall business.

In the first half of this year, Smoore Technology also experienced a dual decline in revenue and profit. Data shows that in the first half of this year, Smoore Technology's cumulative revenue was 567 million yuan, down 85.64% from 3.948 billion yuan in the same period last year. The cumulative net profit for the first six months of 2023 was 148 million yuan, down 86.85% from 1.129 billion yuan in the same period last year. Data shows that in the second quarter of 2023, Smoore Technology's gross profit margin was 26.1%, compared to 43.8% in the same period of 2022.

"The overall performance of the e-cigarette industry in the first half of this year has been relatively poor." An industry insider who wished to remain anonymous told the Securities Daily that on one hand, the domestic market's overall sales have been relatively sluggish due to the impact of the new national standards for e-cigarettes, coupled with some consumers making advance purchases during the transition period; compared to the domestic market, the international market is more active. Going overseas has become a consensus among e-cigarette practitioners, but the overseas progress of some companies has yet to significantly boost the performance of listed companies.

Industry Outlook Expected to Improve

To enhance risk resistance and create new performance growth points, cross-industry transformation has become a trend in the e-cigarette industry.

According to public information, Smoore International is laying out four major tracks, including e-vaporization, heated tobacco products, special-purpose vaporization products, and vaporization for medical use. Smoore Technology has also attempted to enter the coffee and oral care fields.

"It is understandable for listed companies to seek business diversification. However, e-cigarettes will still be the main business for these companies," Ma Weimin believes.

In the short term, Ma Weimin stated that the e-cigarette industry will remain in a period of pain for some time.

From the perspective of consumer habits, in terms of flavor, e-cigarette products are now closer to traditional tobacco, while in terms of price, e-cigarettes are relatively more expensive. "Therefore, it will take time to retrain consumers' consumption habits."

From the marketing perspective, with the significant decline in the gross profit margin of the e-cigarette industry, coupled with the relatively high costs of offline sales channels, agents are less inclined to purchase e-cigarette products, leading to an overall decline in industry prosperity.

In the long term, there are already signs of recovery in the industry. According to data from the Shenzhen Special Zone Daily, the export of e-cigarettes from Shenzhen reached 26.2 billion yuan in the first half of the year, a year-on-year increase of 35.8%. "China is the world's largest e-cigarette manufacturer, with over 70% of global e-cigarettes coming from China," Ma Weimin cited data, indicating that from the development trend of the industry, e-cigarettes will eventually replace traditional cigarettes as mainstream products, and the current market fluctuations also indicate future rebound potential. In the future, as the industry emerges from the trough, a gradual recovery process will be presented.