On January 22, Wuxin technology, China's largest e-cigarette manufacturer and the main body of Yueke, a well-known e-cigarette brand, was listed on the New York Stock Exchange with the stock code of "RLX". The offering price is set at $12, which is 8-10 dollars higher than the offering price guidance range. According to the estimated issue price, Yueke raised nearly $1.4 billion by issuing $116.5 million of American Depository shares.

Wuxin technology opened at $22.34 per share, more than 86% higher than its offering price. By the end of the day, Yueke's shares had surged 145.92% to $29.51 per share, with a market value of $45.8 billion, or about 300 billion yuan.

The founders worked for Uber and didi

According to the prospectus, Wang Ying, founder, chairman and CEO of Wuxin technology, and her team hold 58.7% of the shares, while Jiang long and Wen Yilong, the other two founders, actually hold 9.9% and 6.5% of the shares respectively.

As for institutional shareholders, deep technology linkage of source capital holds 10.7% of the shares, while Sequoia China holds 4.9%.

According to Zhongtai Securities Research Report, in September 2018, Wuxin technology completed 36 million yuan Angel round financing and 12.3 million US dollars a round financing; In November 2018, a + round financing of US $24.9 million will be completed; In February 2019, we will complete round B financing of US $22.1 million; In April and may 2019, we will complete US $75 million round C financing; In August 2019 and January 2020, we will complete the $107.3 million C + round financing; In September 2020, a certain number of angel round and a round shares will be re designated 2, and $182.4 million in D round financing will be completed. Before applying for listing, the total financing amount of Wuxin technology exceeded US $420 million.

The founding teams of relx Yueke are from oppo, Huawei, Chinese Academy of Sciences, L'Oreal, P & G and Uber. Wang Ying has worked for Procter & Gamble, Bain consulting, Uber, Didi, and served as the head of Uber China. After the merger of didi and Uber, Wang Ying became the general manager of the business unit of didi Uber in October 2016. In the next two years, Uber app was shut down, and the Youxiang business led by Wang Ying was taken over by Didi. Later, she was assigned to do the time-sharing leasing business with a bleak future.

In January 2018, Wang Ying decided to make e-cigarettes and founded fog core technology. Three months later, Yueke mass production, 17 months later, Yueke's e-cigarette cartridge production increased 160 times. A layman, leading a group of executives without e-cigarette background, made China's largest e-cigarette manufacturer in one and a half years, and Yueke became the first brand of atomized e-cigarette in China.

Established less than three years, revenue billions

As a partner of SIMORE International

According to the CIC report, in terms of retail sales, the company is the number one e-cigarette brand in China in 2019 and the first three quarters ending September 30, 2020, with a market share of 48.0% and 62.6% respectively. According to a survey conducted by CIC in September 2020, Yueke's brand awareness ranks first, accounting for 67.6% of users of electronic atomization products in China.

In its IPO prospectus, Wuxin technology said that China is the world's largest potential e-cigarette market, with an estimated 286.7 million smokers in China by 2019, and the potential market size of the industry is 112.9 billion yuan. However, the penetration rate of e-cigarette products is only 1.2%, compared with 32.4% in the United States. Compared with the United States, there is still a big gap in the penetration rate of e-cigarette in China, which also means that the future development space of e-cigarette industry is very considerable.

Within three years of its establishment, the revenue scale of Wuxin technology has reached billions, and it has made profits in the second year.

According to the data of the prospectus, in 2018, 2019 and the first three quarters of 2020, the company's operating revenue was 132 million yuan, 1.549 billion yuan and 2.201 billion yuan respectively, and its net profit was - 287000 yuan, 47.75 million yuan and 109 million yuan respectively. In less than three years, Wuxin technology created 3.882 billion yuan of revenue and 157 million yuan of net profit.

Prospectus

It is worth mentioning that SIMORE international, the leader of e-cigarette OEM listed in Hong Kong stock market in July 2020, is the contract manufacturer of fog core technology and the third-party operation partner of the exclusive production plant. One of the major sources of income of SIMORE international is the OEM of electronic cigarette products of fog core technology. According to the prospectus of Wuxin technology, in the first three quarters of 2020, 79% of its total purchase amount was purchased from SIMORE international.

The pressure of supervision turns to offline

Decrease in gross profit margin

Data show that in 2018, the revenue of Wuxin technology directly sold to consumers through e-commerce platform and to third-party e-commerce dealers accounted for 33.5% and 6.3% respectively, with the amount of 44.41 million yuan and 8.35 million yuan respectively.

On August 28, 2018, the State Administration of market supervision and administration and the State Tobacco Monopoly Bureau issued the notice on banning the sale of e-cigarettes to minors, urging e-cigarette production and sales enterprises or individuals to close e-cigarette Internet sales websites or clients in a timely manner; Urge the e-commerce platform to close e-cigarette stores in time and take e-cigarette products off the shelves in time, and urge e-cigarette production and sales enterprises or individuals to withdraw e-cigarette advertisements released through the Internet.

On November 1, 2019, the state tobacco monopoly administration and the state market supervision and Administration jointly issued the notice on further protecting minors from e-cigarettes《 The circular once again mentioned that e-cigarettes should not be sold through online channels.

In July 2020, the State Tobacco Monopoly Bureau once again launched a two-month special rectification of e-cigarettes to continuously strengthen the industry standards of e-atomized cigarettes.

Relx Yueke aerosol cigarette counter

At present, Hangzhou, Shenzhen, Nanning, Wuhan and other cities have clearly included e-cigarettes in the control scope of the regulations on the prohibition of smoking in public places. In July 2020, Beijing also invited experts to discuss the issue of e-cigarettes, which may be included in the scope of control in the future.

Under the pressure of supervision, e-cigarette brands are forced to switch from some online sales to all offline sales. According to the prospectus, the number of authorized distributors of Wuxin technology increased from 41 in the first three quarters of 2019 to 110 in the first three quarters of 2020.

This policy directly led to the decrease of the proportion of revenue of Wuxin technology sold directly to consumers through e-commerce platform and to third-party e-commerce dealers to 18.1% and 8% in 2019. By Q3 in 2020, the company basically has only offline dealers as a single sales channel, and the proportion of revenue of offline distributors to the total revenue will reach 98.2%.

After switching to offline, the gross profit rate of Wuxin technology will drop from 44.7% in 2018 to 37.5% in 2019, and it will be 37.9% in the first three quarters of 2020. In this regard, the company explained that the main reason is that the proportion of offline dealers has increased significantly. When the company sells in this channel, the pricing is more relaxed, so as to ensure that dealers and retailers can obtain sufficient profits.

The revenue in the third quarter and the fourth quarter of 2019 is RMB 556 million and RMB 410 million respectively. As costs and expenses are still in a high position, Q4 fog core technology will lose 50.3 million yuan in 2019.

"Tobacco identity" may significantly affect performance

Overseas markets are also under stricter supervision.

In early 2020, the US Food and Drug Administration (FDA) issued a ban on the sale of most flavors of e-cigarettes, and only tobacco and menthol flavors can continue to be sold legally. At the same time, new tobacco products can only be legally sold in the United States through tobacco pre marketing application (PMTA).

Fog core technology started the PMTA project application of the United States in September 2020. So far, only three enterprises in the world have obtained PMTA certification and approval, while six e-cigarette enterprises in China have tried to apply for PMTA, but so far they have not been approved.

It is worth mentioning that, at present, the electronic cigarette body is classified as electronic products, and the cigarette oil is food. E-cigarettes are only taxed as ordinary consumer goods, and its burden is far lower than that of traditional tobacco, avoiding the consumption tax (36%) and tobacco tax (20%) which account for 60% of the total tax. According to the report of the Economic Research Institute of the State Tobacco Monopoly Bureau, the comprehensive tax rate of cigarettes in China is 66.6%.

According to the official website of the National Standardization Administration Committee, up to now, the compulsory national standard project of e-cigarette drafted by the State Tobacco Monopoly Bureau is still under review. Once the e-cigarette is classified as tobacco in the future, the tax fee will increase significantly, which will have a significant impact on the company's performance.

Red Star News reporter Wu danruo