On August 4th, BYD Electronic (0285.HK) announced on their official WeChat account that their wholly-owned subsidiary, BYD Precision Manufacturing Co., Ltd., has been awarded a license by the State Tobacco Monopoly Administration to be an electronic cigarette production enterprise. This means the company has obtained a "ticket" into the electronic cigarette industry.
BYD Electronics holds over 100 related patents in its hands.
According to public sources, BYD Electronic was spun off from parent company BYD and specializes in contract manufacturing of smartphones, masks, and e-cigarettes. As early as 2018, the company started laying the groundwork for its e-cigarette business, and in 2021, BYD Electronic officially launched its ceramic atomizer core (ceramic core) technology with the brand name "BEEM CORE".
According to Tianyancha, the newly licensed BYD Precision Manufacturing Co., Ltd. was established in January 2003 with a registered capital of $145 million USD and Wang Nianqiang as its legal representative. Change records indicate that in March of last year, the company expanded its business scope to include the production, research and development, and sales of electronic atomization products and accessories. Intellectual property information shows that the company has been granted authorization for more than 100 patents related to electronic cigarettes, with over 90 of them being utility model patents.
According to reports, BYD Electronics has completed the patent layout and construction of automated production lines for its full range of electronic atomization products. The company has fully integrated its capabilities in new material research and development, precision mold making, product design and development, as well as intelligent manufacturing, in order to become a practitioner and leader in the healthy harm reduction field. BYD Electronics aims to provide high-quality and reliable products for its customers.
Compared to leading companies in the vape industry like Smoore International, BYD Electronics is a newcomer, but due to its strong manufacturing capabilities, it is seen as a challenger to the industry leaders. BYD Electronics has stated that, as one of the leading companies in the electronic vaporization field, it firmly supports the government's policies regarding electronic cigarettes. It will comply with regulations and make positive contributions to the healthy and orderly development of the industry.
Citigroup expects this business to make little contribution in the next two years.
BYD Electronics has released its annual report for the 2021 fiscal year, showing a revenue of ¥89.057 billion from January 1, 2021 to December 31, 2021, a year-on-year increase of 21.79%. However, the net profit attributable to the parent company was ¥2.31 billion, which is a decrease of 57.55% compared to the previous year, and the basic earnings per share were ¥1.03.
Can electronic cigarettes help BYD Electronic quickly bring in profits? According to a research report released by Citigroup on June 23, the market's anticipation for BYD Electronic's electronic cigarette business is premature, resulting in a significant rebound in the company's stock price. Despite obtaining a license to manufacture electronic cigarettes, domestic demand remains weak under regulatory oversight, and progress in exports will also take some time. It is expected that this business will not contribute significantly in the next two years.
However, the secondary market is highly anticipating BYD Electronics' electronic cigarette business. On August 4th, the company announced that it had been awarded a tobacco monopoly production enterprise license, resulting in a more than 9% increase in BYD Electronics' stock price on the same day. At the midday of August 5th, BYD Electronics rose by 1.60% to close at HKD22.25 per share.
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