Data Reading｜Smoore Interim Financial Report (2): The proportion of own-brand business increased to 22%, and cartridge-type products could not make up for the decline of one-time products

Data Reading｜Smoore Interim Financial Report (2): The proportion of own-brand business increased to 22%, and cartridge-type products could not make up for the decline of one-time products

On August 19, Smoore International released its 2024 first half performance report. The report shows that the group achieved sales revenue of approximately RMB 5,037,242,000 during the review period, a year-on-year decrease of approximately 1.7%, and gross profit of RMB 1,914,597,000, a year-on-year increase of 3.2%. The two supremes found through combing and analyzing the report that Smoore's business revenue structure has changed, and the proportion of its own brand business has increased to 22%. In addition, the growth of cartridge-type e-cigarettes in markets such as Europe is difficult to make up for the decline of disposable e-cigarettes.
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1. This article is limited to industry research and is only for communication between professionals in the industry.
2. This article does not involve any investment forecasts, suggestions, or comments on the capital market.
3. Limited to the author's professional ability, the data and analysis in this article should not be used as a basis for any decision. All data and information shall be subject to the public data and announcements of the relevant companies.
Editor's note: On August 19, Smoore International (06969.HK) released its 2024 first half performance report. Previously, the two supremes made a simple numerical analysis of the report (read for details: numerical reading | Smoore interim financial report: sales revenue has been declining for two years, and cartridge-changing e-cigarettes have grown by 22.5% against the trend in markets such as Europe). The following is a more detailed feature analysis of the report by the two supremes.

[Original by the two supremes] Smoore's 2024 first-half performance report shows that the group achieved sales revenue of approximately RMB 5,037,242,000 during the review period, a year-on-year decrease of approximately 1.7%, gross profit of RMB 1,914,597,000, a year-on-year increase of 3.2%, and net profit of RMB 683,198,000, a year-on-year decrease of 4.8%. The following are the characteristics analyzed and sorted out by the two supremes based on the content of Smoore's financial report this time:

Sales revenue has declined year-on-year for two consecutive years

By comparing Smoore's 2023 and 2024 interim reports, the two supremes found that the company's year-on-year sales revenue has declined for two consecutive years, with a decline of 9.4% and 1.7% respectively.

The company's business revenue structure has changed, and the proportion of its own-brand business has increased from 12.7% to 22.1%

The rapid growth of Smoore's own-brand business is one of the highlights of Smoore's 2024 interim report. Compared with the same period in 2023, the company's sales revenue from its own-brand business increased from RMB 648,852,000 to RMB 1,115,607,000, a year-on-year increase of 71.9%, and the proportion of this business increased from 12.7% to 22.1%. It can be seen that Smoore's business revenue structure has changed, and the proportion of its own-brand business has continued to expand.

Europe and other markets: The growth of cartridge-type e-cigarettes is difficult to make up for the decline in disposable e-cigarettes

Restricted to changes in European regulatory policies, the sales volume of traditional disposable e-cigarettes has declined and is being converted to cartridge-type or open products. Smoore's report shows that the sales revenue of corporate customers in Europe and other markets has shown a downward trend, down 16% year-on-year, and its proportion of total revenue has dropped from about 45.9% in the same period last year to about 39.3% in the review period.

The number of employees in China decreased by 4,243, a year-on-year decrease of 27%, and the number of overseas employees increased by 464, a year-on-year increase of 36%.

Data: Smoore | Graphics: Two Supremacies

Data: Smoore | Chart: Two Supremacy

According to the table, since the first half of last year, the number of Smoore's overseas employees has continued to grow, while the number of Chinese employees has been on a downward trend. Through data comparison, the number of overseas employees increased by 36% year-on-year, while the number of Chinese employees decreased by 4,243, a year-on-year decrease of 27%. Specifically, by comparing Smoore's 2023 annual report and 2024 interim report, it can be judged that during the period from June 30, 2023 to December 31, 2023, Smoore carried out a certain scale of employee optimization, and the number of Chinese employees has stabilized since this year.

Atomization medical and heat-not-burn products are the main R&D growth

In the first half of this year, Smoore's total R&D expenditure increased by 23.7% year-on-year, of which atomization medical and heat-not-burn products were the main reasons for the increase in R&D expenditure, which can be judged Smoore's choice for future product development.

"Cost reduction and efficiency improvement" as the key words, product material costs decreased

Two Supremes noted that in Smoore's 2024 interim report, "cost reduction and efficiency improvement" was mentioned many times, appearing four times in various parts of the report, while it only appeared once in the 2023 interim report. Data shows that Smoore's raw material costs accounted for a decline in revenue, from 49.8% in the same period last year to 47.9% this year. The main reason for the decline in the proportion is the company's promotion of product cost reduction and efficiency improvement and the reduction in revenue from disposable electronic atomization products.

Atomization medical-related devices have been approved by European and American drug testing agencies

Smoore mentioned that during the period, it completed the development and production layout of several drug delivery devices for asthma and chronic obstructive pulmonary disease and the development of more than a dozen drug preparations. The preparations and devices have been approved by European and American drug testing agencies and have entered the stage of pre-clinical or registration batch production respectively. They have not yet been approved for listing.