Simore International’s net profit fell by 42% in the third quarter, and the revenue declined due to the price reduction of some major customers

- The total income and net profit of Simore International in the third quarter decreased year on year

The total income and net profit of Simore International, the leading contract manufacturer of electronic atomization equipment, decreased year on year in the third quarter. On October 14, Smaller International Holdings Co., Ltd. (Smaller International, 06969. HK) announced that, in the three months ended September 30, the total unaudited comprehensive income of the Group during the period was 704.4 million yuan, compared with 1219.3 million yuan in the same period of the previous year, a year-on-year decrease of 42.2%; In the nine months ended September 30, the total comprehensive income of the unaudited group during the period was 2.0885 billion yuan, which was 4.0982 billion yuan in the same period of the previous year, a year-on-year decrease of 49.0%.
According to the financial data disclosed by Smaller International, the adjusted net profit of the unaudited group of Smaller International was 721 million yuan in the three months ended September 30, 1.2488 billion yuan in the same period last year, down 42.3% year on year; As of September 30, the adjusted net profit of the unaudited group was 2.1573 billion yuan, which was 4.2241 billion yuan in the same period of the previous year, down 48.9% year on year.
Simore International pointed out in its announcement that there were three main reasons for the decline of total revenue in the third quarter: first, the gross profit margin fell year on year, mainly because in the first half of 2022, product prices were lowered for some major customers, but the prices remained stable compared with the second quarter of 2022. At the same time, one-time atomization business with low gross profit margin grew significantly, accounting for a higher proportion of the overall business.
Second, according to the established strategy, in order to enhance the long-term competitive advantage and cultivate new growth areas, the Group continued to increase R&D investment, especially in the basic research, medical and health fields of atomization technology. The R&D expenditure in the third quarter of 2022 increased significantly compared with the comparison period.
Third, in order to meet the needs of long-term development in the future and improve the management and marketing capabilities of the Group, the Group has increased its investment in information system, organization and process, marketing system construction and other aspects, which has led to a significant increase in management costs and sales costs compared with the comparative period, but it remains relatively stable compared with the second quarter of 2022.
Simore International pointed out in the announcement that, as stated in the prospectus on June 29, 2020, due to the one-time nature of share based payment expenses related to the stock option plan before the initial public offering related to the employee incentive plan, the management did not regard the project as a key operational or financial indicator internally when reviewing the group’s performance. Therefore, eliminating the impact of the project when calculating the adjusted net profit can better reflect the basic operating performance of the Group and promote regular comparison.
The announcement disclosed that, as of September 30, three months ago, the share based payment expenses related to the stock option plan of Simore International before the initial public offering were 16.6 million yuan, compared with 29.5 million yuan in the same period of the previous year.
According to the official website, Simore International, founded in 2009, is the listed main body of Shenzhen Macwell Technology Co., Ltd., which owns a private brand (VAPORESSO) and three technology brands (FEELM, CCELL, METEX). Headquartered in Bao’an District, Shenzhen, the Group has nearly 20000 employees. On July 10, 2020, Simore International was listed on the Stock Exchange of Hong Kong at an issue price of HK $12.4. On the first day of listing, it closed at HK $31 per share, with a total market value of HK $178.05 billion.
According to the company’s introduction, Simore International produces electronic atomization design and electronic atomization components based on ODM to manufacture heating incombustible products. The products are sold to tobacco companies, independent electronic atomization companies and retail customers. According to media reports, Smaller International not only manufactures for domestic Yueke, Magic Flute, Grapefruit and Xueka, but also for overseas big customers such as British American Tobacco. The Vuse series of British American Tobacco is currently the first in the United States, competing with Juul.
In March 2021, the Ministry of Industry and Information Technology solicited public opinions on the revision of the Regulations for the Implementation of the Tobacco Monopoly Law of the People’s Republic of China and proposed that new tobacco products such as electronic cigarettes should be implemented with reference to the relevant provisions on cigarettes in the Implementation Regulations. On the day when the news was announced, the electronic cigarette concept stock plummeted, and the next day, Simore International’s stock in Hong Kong also plummeted by 27%.
In March 2022, the State Tobacco Monopoly Administration issued the Measures for the Administration of Electronic Cigarettes, clarifying the regulatory rules for new tobacco products such as electronic cigarettes, and specifying that the taste is limited to tobacco flavor. On October 1, 2022, the Administrative Measures for Electronic Cigarettes and the Compulsory National Standards for Electronic Cigarettes came into full force and effect.
In September, Western Securities pointed out in the report of commenting on Smaller International Semi annual Report that the company’s European and other markets performed well, and the Chinese and American markets entered the industry adjustment period. In the first half of 2022, the continuous and repeated COVID-19 epidemic had a certain negative impact on the company’s production, supply chain and logistics.
Western Securities is expected to centralize the industry pattern in the future as the industry supervision becomes stricter, and Simore International is expected to gain long-term benefits. Western Securities also made a risk reminder in the report: demand is less than expected, supervision is more than expected, and new business development is less than expected.
As of October 14, Smaller International closed 2.84% higher at HK $9.400, with a total market value of HK $57.133 billion. Compared with the market value on the first day of listing, the total market value of Simore International has dropped by 67.9%. Compared with the highest market value after listing (which exceeded 500 billion yuan), the total market value of Simore International has dropped by nearly 90%.

web:Electronic Cigarette, Disposable Vape Pen – Aierbaita (aierbaitavapes.com)