According to the list, Chen Zhiping, 44, founder of SIMORE, a major e-cigarette business, ranked 59th with 64 billion yuan, becoming the richest person in the e-cigarette industry. It is worth noting that in addition to Chen Zhiping, there are four founding shareholders on the list, and all of them are on the list for the first time.
According to public information, smore International Holding Co., Ltd. (hereinafter referred to as “SIMORE”) formerly known as Shenzhen mcwell, mainly engaged in e-cigarette OEM, and its customers include Japan Tobacco, British American tobacco, etc. In December 2015, Shenzhen mcwell was listed on the new third board and delisted from the new third board on June 5, 2019. In less than three years, its share price rose from 9.67 yuan at the time of listing to 124 yuan, an increase of more than 10 times.
One year after the delisting, “in order to realize the establishment of an international financing platform and maximize the value of shareholders”, mcwell changed his name to smore and re entered the capital market. On July 10, 2020, Seymour international was listed on the Hong Kong stock exchange with an offering price of HK $12.4 and a capital raising of HK $6.86 billion. On that day, the share price of SIMORE international was HK $31, up 150% from the offering price.
Compared with the closing price on the day of listing, three months since listing, the share price of SIMORE has risen by more than 20%. As of the end of October 20, the market value of SIMORE international reached HK $218.3 billion (contract value: 188.271 billion).
By the end of the first half of 2020, Chen Zhiping, founder of SIMORE, held 34.13% of the company’s shares. From the perspective of performance, from 2016 to 2019, SIMORE achieved revenue of 707 million, 1.565 billion, 3.434 billion and 7.611 billion respectively, with a compound annual revenue growth rate of more than 120%.
“From the point of view of main customers of Semel, its main related products and equipment are largely supplied in overseas markets. At present, a number of overseas countries have been more controversial about the e-cigarette market, and gradually introduced more stringent regulatory and tax policies. ” Zhang Yi, founder of AI media consulting, told time finance.
According to the prospectus, the U.S. market contributed about 50% of sales revenue to smaller from 2016 to 2019. In 2019, the proportion of direct and indirect income from the U.S. market in total revenue decreased compared with the previous three years, but still as high as 46.5%.
Double gross profit margin
According to frost Sullivan data, the global tobacco products market size by revenue increased from $715.7 billion in 2014 to $865.4 billion in 2019 at a compound annual growth rate of 3.9%. Among them, the size of the global e-cigarette market by revenue has rapidly increased from US $12.4 billion in 2014 to US $36.7 billion in 2019 at a compound annual growth rate of 24.2%, and is expected to further grow at a compound annual growth rate of 24.9% to US $111.5 billion in 2024, while the expected compound annual growth rate of the global tobacco market in the next four years is 6.8%.
In contrast, the domestic e-cigarette market penetration rate is low. According to the smore prospectus, the demand for e-cigarettes is concentrated in North America and Europe. In 2019, the United States, the European Union and the United Kingdom occupy the largest market share of e-cigarettes by ex factory price, and are expected to continue until 2024.
On the other hand, 90% of the world’s e-cigarettes are produced in China, and 90% of the e-cigarettes produced are mainly used for export. China’s e-cigarette manufacturing industry is concentrated in Shenzhen, with more than 600 e-cigarette companies gathered, and SIMORE is one of the earliest e-cigarette manufacturers.
At present, the main business model of SIMORE is mainly divided into two parts, one is for enterprise customers, the other is for retail customers. According to the financial data, from 2017 to 2019, the operating revenue of SIMORE was 1.565 billion yuan, 3.433 billion yuan and 7.611 billion yuan, respectively, with a three-year growth rate of 121%, 119% and 122%; while the net profit was 189 million yuan, 734 million yuan and 2.17 billion yuan, with the growth rates of 78%, 289% and 208% respectively.
The substantial growth in performance has made smaller “the world’s largest manufacturer of electronic atomization equipment”. According to the prospectus, in 2019, the top five participants in the world accounted for 30.5% of the global electronic atomization equipment market in terms of revenue, and Seymour was the world’s largest manufacturer of electronic atomization equipment (calculated by ex factory price), accounting for 16.5% of the total market share.
However, the prospectus also revealed that in 2019, the average sales price of electronic atomization equipment and electronic atomization components for enterprise customers was 8.7 yuan, 7.5 yuan, the total total sales price was no more than 20 yuan, and the sales price for retail customers was 81.8 yuan. In 2016, the sales price for retail customers was 159.5 yuan, and the average sales price of electronic atomization equipment for enterprise customers was 3.5 yuan. It is understood that smaller sells products to distributors at about 34% to 43% of the recommended retail price.
In this context, the gross profit of SIMORE is also increasing year by year. In 2019, the largest gross profit margin of SIMORE is electronic atomization equipment, with the gross profit rate of 47%, electronic atomization components of 42.1% and private brand of 34.7%. Its overall gross profit margin increases from 24.3% in 2016 to 44% in 2019, nearly doubling.
Rely on overseas market
According to the data, as the largest market, the e-cigarette market in the United States has increased from US $6.4 billion in 2014 to US $20.7 billion in 2019, and it is expected to reach US $64.4 billion in 2024. In 2019, the e-cigarette market distribution in the European Union, the United Kingdom, China and Japan will reach US $7.3 billion, US $2.7 billion and US $500 million.
As of the last practical date of listing in 2020, most of its customers are located in overseas markets, including the United States, Japan and European countries. In terms of business proportion, the revenue of products directly or indirectly transported to the United States in 2016, 2017, 2018 and 2019 were about 392 million yuan, 781 million yuan, 1.798 billion yuan and 3.539 billion yuan, respectively, accounting for 55.4%, 49.9%, 52.4% and 46.5% of their annual total revenue respectively.
Specifically, most of the customers of smore are world-renowned leading tobacco companies, including the world’s top tobacco companies, independent electronic atomization companies and distributors of our own brand APV and some electronic atomization components. Its top five customers contributed 73.7%, 65.6%, 55.3% and 63.0% in 2016, 2017, 2018 and 2019 respectively. In response, Mr. Moore said in the prospectus, “most of our revenue comes from our top five clients, and the loss of any of these customers may have a material adverse effect on our business and financial condition.”
In addition, due to the increasing popularity of electronic atomization equipment in recent years, many countries are considering the implementation of more stringent laws and regulations to regulate the emergence of traditional cigarette substitutes. The World Health Organization also recommends that the government consider banning the use of e-cigarettes in indoor settings to protect non users from involuntary exposure to second-hand aerosols, issue warnings about the potential health risks of e-cigarettes, and impose higher taxes on e-cigarettes.
For example, Portugal has banned the use of electronic atomization equipment in confined spaces since 2018, while Indonesia has imposed a consumption tax of 57% of the sales of electronic atomization equipment since July 1, 2018. The U.S. Food and drug administration has also set up a series of entry requirements for the electronic atomization industry. On April 27, 2020, the FDA issued a number of warning letters to manufacturers and distributors of electronic nicotine delivery system products, because they are suspected of selling these products to young people or encouraging them to use them.
In addition, given that about a quarter of the European Commission member states have imposed specific taxes on electronic atomization equipment, the Commission is considering a potential uniform tax on electronic atomization equipment, which may have a significant impact on the sales of electronic atomization equipment to European customers.
In this regard, Zhang Yi said, “the whole e-cigarette industry has not reached the golden age, and the global market of hundreds of millions of smokers still needs to be reasonably transformed. If the follow-up enterprises can minimize the harm of e-cigarette processes, equipment and products, it may become the most important competitiveness to break through the encirclement.” However, in the first half of this year, the situation of increasing revenue but not increasing profit occurred in the first half of this year. When the total revenue increased by 18.54% year on year, the net profit attributable to the parent decreased by 91%.