Smoore goes to Hong Kong for an IPO

In the past three years, the financing information disclosed by the electronic cigarette industry involved dozens of projects, and more than a dozen financing incidents occurred in the first half of this year alone. With the help of capital, the electronic cigarette industry has been quickly pushed to the spotlight.

Following the listing of China Tobacco International in Hong Kong, the e-cigarette market seems to be moving.

Smoore International Holdings Co., Ltd. (hereinafter referred to as “Smoore”) submitted a listing application to the Hong Kong Stock Exchange in the evening of December 19, intending to list on the main board of the Hong Kong Stock Exchange. CITIC Lyon Securities acted as sole sponsor.

Prior to this, Smoore was listed on the NEEQ and became the first NEEQ stock with a yield of more than 10 times.

Company Profile

Founded in 2006, Smoore is currently one of the world’s largest electronic cigarette suppliers including ALD. It has 9 large-scale production bases, mainly engaged in the research, development, production and sales of electronic atomizers and open electronic atomization APV.

At present, the company’s business mainly includes two major segments: ODM (original design and manufacturing) and its own brand APV (open electronic atomization device). One is to research, design and manufacture closed electronic atomization device and electronic atomization components for tobacco companies and independent electronic atomization companies (such as Japan Tobacco, British American Tobacco, Reynolds Asia Pacific, RELX and NJOY); Retail customers conduct research, design, manufacture, and sales of private-label open electronic atomizing equipment or APV.

It is worth noting that although the domestic e-cigarette trend has rised in 2018, in terms of Smoore’s revenue source, sales revenue from overseas accounted for more than 88% of total revenue in 2018, far better than domestic revenue of less than 12%. The proportion of Smoore’s own brand Vaporesso products is mainly sold overseas, which is one of the reasons for the huge difference between domestic and foreign revenue.

An electronic cigarette is a battery-powered device that is usually similar in design to a traditional cigarette and vaporizes an atomized electronic atomizing fluid when a user inhales it. Electronic cigarette products include closed electronic atomization device, open electronic atomization device and heat not burn device.

Demand for e-cigarettes is concentrated in North America and Europe, while e-cigarettes are mainly manufactured in China, and 90% of e-cigarettes worldwide are produced in China. Moreover, 90% of e-cigarettes produced in China are mostly used for export. China’s electronic cigarette manufacturing industry is concentrated in Shenzhen, gathering more than 600 electronic cigarette companies. Smoore was one of the earliest electronics manufacturers. Its revenue increased by 178.4% from RMB 1.176 billion in the first six months of 2018 to RMB 3.274 billion in the first six months of 2019, benefiting from the company’s existing and new corporate customers equipped with ceramic heating technology. Orders for electronic atomization device increased, the device received positive market feedback, and the market awareness of its own brand APV increased.

In terms of revenue composition, in 2016, 2017 and 2018 and the first six months of 2019, the revenue generated from sales to corporate customers reached 72.1%, 64.1%, 72.6% and 80.6% respectively.

On the other hand, in 2016, 2017 and 2018 and the first six months of 2019, the revenue generated from sales to retail customers reached 27.9%, 35.9%, 27.4% and 19.4% respectively.

Competitiveness and risk points

Smoore believes that it has the following competitive advantages: it is the world’s largest electronic atomization technology solution provider; it has a leading-edge comprehensive R & D and production platform; scalable production capacity and stable supplier relationships; a leading global tobacco company and independent vape company’s customer network and comprehensive product portfolio; experienced management team and talent pool.

Under the premise of the great development of the electronic cigarette industry, Smoore will have a lot of room for development.

In the future, the company will still have to bear many unique challenges, risks and uncertainties: the US tobacco product law will adversely affect its business; changes and implementation of existing laws and regulations in the electronic cigarette industry will increase its costs; If the medical industry interferes for a long time to determine the long-term health risks caused by e-cigarettes, the demand for the e-cigarette market will drop sharply. The e-cigarette industry is still under constant influence due to uncertain factors, and it is strongly dependent on its five largest customers.

Fundraising plan

At present, the company’s development strategy is: enhance research and development capabilities to maintain the company’s leading position and support long-term business development; improve production capacity and operation and production efficiency; rely on existing customers to attract new customers to increase market share in different fields; seek strategic mergers and acquisitions and appropriate business cooperation.

As a supplier in the upstream of the industry chain, Smoore chose to go public at this point in time to seek more financial support, and also hoped to seize this trend and further strengthen its leading position in the supply chain.

Related Company: ALD