Jinjia Group: Business Declining while Diversifying into New Materials

On September 25, 2023, the list of the top 500 companies in Shenzhen was released, with a total of 14 e-cigarette companies making it to the list. It is worth noting that the leading e-cigarette company, Jinjia Corporation (002191), has dropped eight places compared to the previous year, now ranking 178th. Among the 14 e-cigarette companies on the list, Jinjia Corporation is ranked fourth, trailing behind Macwell, Yinhe Technology (300457), and Heaven Gifts.

Why has Jinjia Company's ranking declined? Insights may be gleaned by examining its financial report for 2022.

According to financial reports, Jinjia Corporation recorded operating revenue of 5.189 billion yuan in 2022, with a meager year-on-year growth of just 2.4%, indicating a significant slowdown in growth. Additionally, the company's net profit for the year was only 197 million yuan, experiencing a substantial decline by an alarming 80.65% compared to the previous year.

As we enter 2023, Jinjia Corporation continues to underperform. In the first half of the year, the company's revenue amounted to approximately 2.033 billion yuan, a decrease of 23.09% compared to the same period last year. Its net profit stood at around 280 million yuan, representing a decline of 44.02% year-on-year.

From the perspective of the main business:

• Cigarette brand revenue decreased by 25.23% on a year-on-year basis.
• The revenue from the packaged products decreased by 19.31% year-on-year.
• The revenue from sales of new packaging materials decreased by 28.51% compared to the previous year.
• The revenue of the new tobacco business has increased by 81.77% year-on-year.

It is evident from the data on main business revenue that Jinjia Corporation's three core businesses experienced a significant decline in the first half of this year. However, it is worth noting that the revenue from their new tobacco business has seen a substantial increase.

In regards to the company's layout in the new tobacco business, Jinjia Holdings previously expressed on the investor platform that its invested company, Jiaju Electronics, has established Viyue Company in Hong Kong, responsible for the construction of overseas channels and brand promotion of new tobacco products. They have particularly focused on expanding their e-cigarette business in Southeast Asia, the Middle East, Russian-speaking countries, and Japan. 

However, despite the rapid development of the new tobacco business, it only accounts for 15.13% of Jinjia Corporation's total revenue, less than half of the proportion of revenue from traditional tobacco products. In the future, as production capacity continues to be released, there is still uncertainty about whether the new tobacco business can replace traditional tobacco products and contribute more revenue to Jinchia Corporation.

Jinjia Group's recent announcement indicates that the company appears to be expanding its reach beyond the new tobacco industry and into the field of new materials.

Jinjia Corporation has announced that it plans to invest 500 million yuan to establish a wholly-owned subsidiary called Jinjia Xinyuan. The main focus of this subsidiary will be on research and development, investment, and management of electronic materials related to high value-added semiconductor materials and functional films. Currently, Jinjia Xinyuan has successfully completed its business registration.

Will the new materials business become another revenue growth driver for Jinjia in the future?