China's first e-cigarette production license is coming!

The first domestic electronic cigarette production license will be born!

On the evening of June 13, Jincheng Pharmaceutical announced that the company had received the letter of decision on approval of tobacco monopoly license issued by the State Tobacco Monopoly Administration. This is the first company in China to announce that it has obtained the production license of electronic cigarette monopoly, which is of great significance.

It is worth noting that the main functions of the national unified electronic cigarette trading management platform have been completed and will be officially put into operation on June 15. With the launch of the electronic cigarette trading platform, channel control and product traceability will become an important way of the new generation of electronic cigarette supervision, and the industry will usher in a new era of traceability supervision of "one cigarette, one identity".

Caitong Securities believes that the regulatory rules for domestic electronic cigarettes have been gradually implemented, and China's electronic cigarette industry has officially entered a new era of standardized development. In the short term, the policy window period is conducive to the smooth transition of all sectors of the industry; In the long run, the clearing of unqualified products and production capacity will promote the concentration of market share and benefit the leading enterprises in production, brand and other links.

Jincheng Pharmaceutical's Decision on Obtaining Electronic Cigarette Production License

On the evening of June 13, Jincheng Pharmaceutical announced that its wholly-owned subsidiary, Jincheng Medical Chemical, had received a decision letter on the approval of tobacco monopoly license issued by the State Tobacco Monopoly Administration.

According to the Decision, the application for (new) tobacco monopoly production enterprise license proposed by Jincheng Medical Chemical Co., Ltd. was examined by the State Tobacco Monopoly Administration according to law, and was considered to meet the statutory requirements, so it was approved. At present, the Company has not received the license for tobacco monopoly production enterprise issued by the State Tobacco Monopoly Administration. The company will timely perform the obligation of information disclosure after receiving the license documents.

Recently, the State Tobacco Monopoly Administration disclosed that the competent administrative department will approve and issue a number of tobacco monopoly production enterprise licenses for e-cigarette related production enterprises that meet the administrative licensing conditions. Jincheng Medical&Chemical became the first company in China to announce that it has obtained the e-cigarette monopoly production license.

According to the requirements of the Measures for the Administration of Electronic Cigarettes issued in March 2022, the establishment of electronic cigarette production enterprises (including product production, co processing, brand holding enterprises, etc.), aerosol production enterprises, and nicotine production enterprises for electronic cigarettes must obtain tobacco monopoly production enterprise licenses.

According to the notice issued by the State Tobacco Monopoly Administration, the eligible subjects who can apply for the production license of electronic cigarettes can only be the existing subjects before the transition period, that is, the electronic cigarette product manufacturers (including product production, co processing, brand holding enterprises, etc.), aerosol manufacturers Nicotine production enterprise for electronic cigarette. From May 5, all production enterprises can apply for production license.

The business scope of the electronic cigarette production license is divided into three categories: electronic cigarette products (factories and brands), aerosols (tobacco oils), and nicotine (nicotine) for electronic cigarettes.

The factories and brands applied for the production license of electronic cigarette products, the tobacco oil enterprises applied for the production license of aerosols, and the nicotine enterprises applied for the production license of nicotine for electronic cigarettes.

Within the business scope of these three types of production licenses, domestic sales and export can be selected at the same time, and product types can also be selected at the same time, such as smoke bombs, cigarette sets and combinations.

In addition to Jincheng Pharmaceuticals, a wholly-owned subsidiary of Jincheng Pharmaceuticals, other companies have applied for the issuance of tobacco monopoly production license.

Shunhao Shares said on the investor interaction platform that the relevant business companies of the company have submitted an application for an electronic cigarette license, and are now giving feedback according to the requirements of the relevant national departments. The specific approval progress is subject to the official information of the relevant departments.

Jinjia Shares also disclosed on the interactive platform recently that the company's brand FOOGO electronic cigarette has submitted an application for intention and received an online review notice issued by the relevant administrative department. The company is actively preparing relevant materials.

Yingqu Technology also said on the investor interaction platform recently that the company is actively planning for the application of electronic cigarette production license, and the specific progress is subject to the review progress of relevant competent departments.

According to Tian Feng Securities, after the competent department has carried out the preliminary verification and examination procedures for the enterprises that have submitted applications, the domestic market is expected to welcome the landing and issuance of several production licenses in June August.

Electronic cigarette industry ushers in a new era of traceability supervision

On June 2, the State Tobacco Monopoly Administration released three documents on its official website, namely, "Answers to Questions Concerning the Administrative Licensing of Electronic Cigarettes and the Technical Evaluation of Products", "Rules for the Logistics Management of Electronic Cigarettes", and "Rules for the Management of Electronic Cigarette Transactions (for Trial Implementation)".

Among them, Article 6 of the "Answers to Questions Concerning the Administrative Licensing of Electronic Cigarettes and the Technical Evaluation of Products" points out that the main functions of the national unified electronic cigarette trading management platform have been completed, and the verification has been completed in some regions and enterprises by means of pilot. On June 15, 2022, the platform will be officially put into operation as scheduled. At that time, various electronic cigarette market entities should gradually enter the platform for trading and settlement.

In accordance with the relevant provisions of the Measures for the Administration of Electronic Cigarettes, an electronic cigarette manufacturer without a production license shall not conduct transactions through the electronic cigarette trading platform. After the end of the transition period, the sales of electronic cigarette products, aerosols and nicotine for electronic cigarettes by electronic cigarette manufacturers outside the electronic cigarette trading management platform will be investigated and dealt with according to law.

It is understood that, at the production end, electronic cigarettes implement "one thing, one code", and the traceability code appears in the three links of electronic cigarette product warehouse out, warehouse in wholesale enterprises and export from wholesale enterprises, realizing the information traceability chain of the whole industrial chain.

The retail end implements "one store, one license". When chain enterprises apply for electronic cigarette retail license, each branch shall apply to the local tobacco monopoly administrative department where the business site is located. Therefore, the online sales store of the store may not be able to obtain the sales license. Those whose main business has nothing to do with electronic cigarette retail business cannot apply for retail license.

Analysts pointed out that channel control and product traceability are important ways of the new generation of electronic cigarette supervision. With the establishment of the electronic cigarette trading platform, the industry will usher in a new era of "one cigarette, one identity" traceability supervision.

Leading enterprises will benefit

After the release of electronic cigarette related news, A-share electronic cigarette concept stocks rose sharply today, Shunhao shares rose by the limit, Dongfeng Shares, Jincheng Pharmaceutical, Yinghe Technology, etc. rose by more than 5%. Smaller International, the leading manufacturer of atomized electronic cigarette, which was listed in Hong Kong stock market, rose nearly 5%, and the US stock fogwick technology once rose more than 6%, but it turned green soon after the opening.

The State Tobacco Monopoly Administration, in accordance with the principles of law and regulation, stability and order, overall consideration, and classified guidance, does not permit enterprises with backward technological equipment, unqualified product quality, substandard management of hazardous chemicals and environmental protection, production safety risks, and violations of laws and regulations. Tianfeng Securities believes that this measure will be conducive to the healthy and sustainable development of domestic supply chain enterprises with formal brands, production compliance, processes and environmental protection standards.

Compared with traditional tobacco products, the new type of tobacco (atomized electronic smoke and HNB) has the characteristics of no burning, providing nicotine, basically no tar, etc., and its harm reduction is obvious. It is estimated that by 2023, the scale of global new tobacco will reach US $86.7 billion, including US $46.82 billion for atomized electronic cigarettes and US $39.88 billion for HNB. According to Frost Sullivan, the global electronic smoke penetration rate will reach 9.3% in 2024.

It is understood that the electronic cigarette industry chain mainly includes upstream raw materials and accessories, midstream manufacturing and brands, and downstream channel sales. Upstream raw materials mainly include cigarette bombs and cigarette sticks. The flavors in cigarette bombs are represented by China Burton, Warburg International, Aipu and other enterprises. The batteries in cigarette sticks are represented by Yiwei Lithium Energy, BYD Electronics and other enterprises. The main electronic cigarette chip manufacturers are EVOLV, Yihai Electronics, etc.

Manufacturing enterprises in the middle reaches are represented by Simore International, Heyuan Group and Zhuolineng. Domestic brand enterprises include Yueke, Magic Flute, Grapefruit, etc. Foreign brands include Vuse, Juul, Njoy, etc.

Downstream channel sales include brand stores represented by Yueke and Ono, and other retail channels represented by Aishide.

Caitong Securities believes that, on the policy side, the United States conducts access management through PMTA, and the leading brands and core supply chain enterprises that first pass the audit are expected to fully enjoy the dividend of industry development; Intensive domestic policies have been introduced to help the industry stabilize and reach a far future. After the long-term unqualified products and production capacity are cleared, the market share will be concentrated, and the advantageous enterprises in production, brand and other links will benefit significantly.