Smol's revenue in 2021 reached a new high of 13.76 billion yuan, and this year's performance growth point looks overseas

Reporter | Ge Zhenwei

Due to revenue growth, cost reduction and efficiency increase led to an increase in gross profit margin, global atomization technology giant Smol earned more than 5 billion yuan (RMB, the same below) in 2021, a new high.

According to Smore International (06969. HK) released on March 30, 2021 results report, in 2021, the company achieved revenue of 13.76 billion yuan (RMB, the same below), an increase of 37.4% year-on-year; profit and comprehensive income for the year of 5.29 billion yuan, an increase of 120.3% year-on-year; adjusted net profit of 5.44 billion yuan, an increase of 39.8% year-on-year; gross profit margin of 53.6% (2020: 52.9%), further improved.

Smol's main business is divided into two parts: one is the TO B business of researching, designing and manufacturing closed electronic atomization equipment and electronic atomization components for tobacco companies and independent electronic atomization companies, and the other is the TO C business of research, design, manufacturing and sales of private brand open electronic atomization equipment or APV for retail customers.

According to the financial report, the revenue of Smol's TO B business exceeded 10 billion to 12.59 billion yuan for the first time last year, an increase of 37.4% year-on-year, accounting for more than 90% of revenue; the revenue of TO C business for retail customers was 1.16 billion yuan, an increase of 37.1% year-on-year.

In terms of revenue sources, in 2021, Simar's revenue from Chinese mainland increased by 104.1% year-on-year to 5.53 billion yuan, accounting for 40.2%. Since the second half of last year, its overseas revenue accounted for more than 70%. With the tightening of domestic policies this year, The growth point of Smore's performance in 2022 will mainly come from overseas markets.

On March 11 this year, the State Tobacco Monopoly Administration issued the "Administrative Measures for Electronic Cigarettes", which clearly pointed out: From May 1, the sale of flavored electronic cigarettes other than tobacco flavors and electronic cigarettes that can add atomizations by themselves is prohibited; production, wholesale and retail all require relevant tobacco monopoly licenses.

Industry data show that at present, domestic taste tobacco sales account for more than 90%, and taste supervision is bound to have a significant impact on demand.

For the impact of the new policy, Simmer said that the impact of the new policy on the company's operation is mainly reflected in the landing link of the entire implementation rules, which involves some inventory adjustment and digestion of old products before May 1, including the declaration and listing of flavor products that comply with the new regulations, and is still waiting for the relevant departments to open the channel of new products.

CITIC Securities judged that the growth rate of the domestic e-cigarette market will slow down to about -20% in 2022, will return to nearly 0% growth in 2023, and is expected to return to stable growth of more than 10% in 2024.

For this year's performance expectations, Simar responded to the interface news Greater Bay Area channel reporter: "The company's overall performance in 2022 will have certain pressure, but there are also ways to cope, confidence mainly from the steady growth of overseas business and the upcoming launch of innovative business (disposable products) in overseas markets brought about by the increase." It is expected that there will be a relatively large growth in the overseas market, thus compensating for a possible short-term decline in the domestic market. ”

According to Sullivan report, In 2021, Smol's share of the global market share continued to expand to 22.8%, exceeding the sum of the second to fifth places, and continued to maintain its position as the world's largest manufacturer of electronic atomization equipment. The report pointed out that in the next 5 years, the global electronic atomization equipment market will grow rapidly, with a compound growth rate of 24.6%. However, the report from Zhiyan Consulting pointed out that the share of atomization products by 2024 is only 9.3%.

Chen Zhiping, chairman of the board of directors of Simmer International, said that although Simmer has gained a large global market share, it is only a drop in the ocean for the overall market. He believes that the core of the further development of the atomization market is to achieve a fundamental experience breakthrough in safety and taste improvement through in-depth technological innovation.

In 2021, Smol launched a new generation of self-developed automated production lines to realize the automated production of assembly, liquid injection, packaging and other full production lines, and its single-line production efficiency can reach 7200 standard atomizers per hour, and take the lead in large-scale application to core customers.

In the electronic atomization solution, the ceramic core is the core component, which can heat the smoke oil into the "fog" that the user sucks into the mouth, which directly determines the user's experience. In the past few years, Simar, which has the first-mover advantage of ceramic atomization core technology, has become the biggest beneficiary.

According to the financial report, by the end of 2021, Simmer has applied for 3408 patents, covering four major technology types of temperature control, heating body, anti-leakage liquid and reservoir, and 1187 new patent applications were filed worldwide last year, an increase of 60% over the previous year. The vast majority of these patents revolve around the "atomized CPU" ceramic atomization core technology, which further consolidates the company's patent barriers.

The construction of patent property rights barriers is inseparable from huge investment. In 2021, Smol invested 670 million yuan in R&D expenses, an increase of 59.7% year-on-year. According to the current budget, the company expects that R&D expenditure in 2022 will reach about 1.68 billion yuan, more than the total R&D investment in the past six years.

The direct embodiment of the growth of R&D investment is the increase in the scale of R&D personnel. By the end of 2021, Smol has 1254 R&D personnel, including 101 doctors and above, an increase of 47% and 215% year-on-year, respectively. Seven basic science research institutes established in China and the United States have been put into operation.

According to the financial report, Simmer will also carry out new exploration and layout in the field of medical treatment and beauty this year, and the company is cooperating with well-known teams at home and abroad to develop medical, beauty and other related products, which is expected to be introduced to the market soon. In addition, Smore will enter the disposable category overseas this year, which is the first time that Smore has entered the field.

The atomization industry has broad prospects and the company is full of confidence in the future. Chen Zhiping said that this year will continue to increase investment in research and development, especially in the fields of material science, fluid mechanics, aerodynamics, thermodynamics and other fields, to maintain technical advantages in the field of atomization; at the same time, explore the application of atomization technology in the field of medical and health.

In terms of stock price performance, it is affected by both regulation and market, Simar International (06969. HK) share price from 2021 all the way down, the market value from the peak shrinkage of more than 80%. As of March 31, the close was HK$18.8 per share, down 13.76% on the day, with a market capitalization of HK$113 billion.