Telling Holdings’ semi-annual report shows a great increase in the e-cigarette business

On July 29, Telling Holdings released the 2021 semi-annual report. The report shows that the company’s operating income in the first half of 2021 was 37.556 billion yuan, a year-on-year increase of 26.64%; the net profit attributable to shareholders of listed companies was 86.961 million yuan, a year-on-year increase of 19.3%; the net profit deducted from the parent was 76.9805 million yuan, a year-on-year increase An increase of 168.42%; basic earnings per share of 0.085 yuan per share.

The company said that in the first half of the year, the company continued to focus on its industrial Internet strategy, fully integrating grid channels with Internet platforms, and striving to create an efficient omni-channel social marketing network.

According to the data, Telling Holdings is mainly engaged in smart terminal distribution business, lottery business, retail e-commerce business, mobile resale and mobile Internet business. During the reporting period, the company’s net cash flow from operating activities was -1 billion yuan, a year-on-year decrease of 338.57%. The company said it was mainly due to the shipment of the advance payment at the end of the previous year.

It is worth noting that the ratio of net cash flow/net profit from Telling Holdings’ operating activities has continued to decline. The semi-annual reports for 2019, 2020, and 2021 show that the company’s operating activities net cash flow/net profit ratio is 14.72, 5.81, -11.74, respectively, and the quality of earnings is showing a gradual decline.

The 2021 semi-annual report shows that the profitability of Telling Holdings’ main communications business is very weak, and the gross profit margin of communications product sales is only 2.11%. In order to create new profit growth points, in the first half of this year, Telling Holdings began to accelerate the deployment of e-cigarette business, taking e-cigarette business as the company’s second life curve and intends to become the first channel brand in the electronic atomization industry.

Prior to this, the company signed a strategic cooperation agreement with the top e-cigarette brands Boulder and vvild, becoming the only national representative of Boulder and vvild. The two parties mainly cooperate in offline retail scenarios and conduct omni-channel sales. Telling Holdings is responsible for expanding the market for branded products and gradually increasing the market share of branded products. Recently, Telling Technology has joined hands with the electronic atomization brand vitavp, becoming the national representative of the vitavp brand.

According to iiMedia Consulting’s data, affected by factors such as tax rates, price increases, and strengthened national controls, the development of China’s cigarette market has slowed down, while the e-cigarette market has accelerated its expansion. The market size reached 7.86 billion yuan in 2019 and is expected to exceed 9 billion yuan in 2021.

IiMedia Consulting analysts believe that although the current market size of the e-cigarette industry is expanding year by year, due to the large group of traditional tobacco consumers in China and the country’s gradual tightening of e-cigarette regulations, the industry’s Development prospects should be cautious.

As of June 30, Telling Holdings has opened 1,414 stores through investment promotion. In the first half of 2021, the e-cigarette business of Telling Holdings achieved revenue of 26.365 million yuan, accounting for 0.07% of total revenue. The gross profit margin was 23.96%, which was 21.85 percentage points higher than the gross profit margin of the main business communication business.

Independent economist Wang Chikun told reporters that the tobacco industry has always been a major tax collector in my country, and the inclusion of regulation this time is also to prevent the disorderly impact of e-cigarettes on traditional tobacco. In this context, the government is bound to strictly approve the issuance of e-cigarette qualifications.

Wang Peng, an associate professor at Renmin University of China, told reporters that from a macro perspective, e-cigarettes face a very large policy risk. Whether from a social or medical perspective, e-cigarettes will not be promoted in a very positive manner. Public opinion events are very detrimental to the development of the entire industry.

For the channel business, there are also no small business risks, such as how to avoid publicity and sales to minors, and how to grasp the standards in advertising to meet the requirements of the regulation layer.

Generally speaking, the barriers to entry of the e-cigarette industry are relatively low, and there are fewer very attractive brands. A lot of publicity, store design, and a lot of time and labor cost are required. To a certain extent, store fixed cost investment It is also higher, leading to low profits.

Wang Peng believes that the current homogenization competition between e-cigarette brand owners and distributors is relatively serious. Either fight for price or fight for marketing, which will easily lead to bargaining and low profit margins. The future development of the e-cigarette industry must be towards compliance and branding, with its own characteristics and differences, and at the same time strengthening industry self-discipline and regulation.