Jingjia subsidiary receives tobacco production license for electronic cigarettes

On the evening of August 4, Jingjia Co., Ltd. (002191) announced that its controlling subsidiary, Shenzhen Yunpu Xinghe Technology Service Co., Ltd. (hereinafter referred to as "Yunpu Xinghe"), received a tobacco monopoly production enterprise license (OEM) issued by the State Tobacco Monopoly Administration.

It is understood that Yunpuxinghe mainly provides one-stop production and processing, assembly and supply chain services for electronic cigarette brand customers. Currently, they operate in a 20,000 square-meter research and production facility located in the Jingjia Industrial Park in Shenzhen.

Jingjia Corporation announced that in the future, Yunpuxinghe will rely on the accumulated advantages of resources, technology, team, and other comprehensive advantages to provide electronic cigarette and pod production and processing services to customers. This will have a positive impact on advancing the development of the new tobacco industry and the future production and operation of the company.

This is the second license obtained by Jinjia as of now. In July, another subsidiary company of Jinjia, Yunnan Yunshuo Technology Co., Ltd. ("Yunshuo Technology"), received a tobacco monopoly production enterprise license (aerosol) from the State Tobacco Monopoly Administration. As one of the first companies in Yunnan Province to obtain a tobacco monopoly production enterprise license (aerosol production enterprise), Yunshuo Technology will expand the research and development, production and sales of electronic cigarette e-liquid and other products within the scope of this license.

As we enter August, there is less than two months left until the end of the transition period for new regulations on electronic cigarettes. The issuance of tobacco production licenses has become increasingly frequent, and it appears that Jianjia Holdings may also receive a license in the near future.

It is understood that Jing Jia Group has laid out its involvement in the entire platform of the new tobacco industry chain.

Upstream, there is a strategic focus on vape oil, heat-not-burn (HNB) flavors and fragrances, and new materials with two companies in this space - Yunshuo Technology and Changyi Technology. Yunshuo Technology is primarily involved in the research and development, production, and sales of traditional tobacco flavors and fragrances, as well as vape oil with a client base that includes several Chinese tobacco companies. Changyi Technology has carved out a stake in the HNB flavors and fragrances sector, as well as related new materials.

In the midstream sector, there are several companies providing original design manufacturing (ODM) services for renowned domestic and international electronic cigarette brands. Some major players in this market include Jingjia Technology, which specializes in ODM/OEM production, as well as Yunpu Xinghe and several others.

In downstream news, FOOGO (Innovation Flavors Technology), a new tobacco brand, has been achieving positive reviews and making strides in market expansion with its electronic cigarette products. Meanwhile, Yunpu Xinghe in Shenzhen and Indonesia is providing a new tobacco supply chain service for customers domestically and overseas. Hong Kong's Hengtian Commercial is primarily responsible for tobacco and related products in import/export trade and overseas promotion.

Jingjia Corporation and several of its subsidiary companies are in the process of applying for various licenses. Currently, they have obtained licenses for producing vaporized substances and manufacturing electronic cigarettes through subcontractors. If their brand license application is approved, Jingjia Corporation will become the first listed company with complete involvement in the electronic cigarette industry chain.

Jiangjia Corporation announced that it is continually improving its service chain in the industry to offer clients a range of services including tobacco extracts, flavorings, ODM, assembly, import and export, customs clearance and logistics. The company is committed to becoming a comprehensive service provider in the tobacco related industry, possessing advanced design and research and development techniques, excellent production and manufacturing capabilities, and complete service capacity.

With the implementation of domestic e-cigarette policy measures being steadily promoted, the industry policies are becoming clearer, and the e-cigarette industry in China has officially entered a new era of regulated development with established rules.

Tianfeng Securities believes that the regulatory policies are raising industry barriers by directly setting standards for electronic cigarettes, increasing the difficulties in product research and development and production. Companies engaged in the electronic cigarette business must obtain approval from the tobacco monopoly administrative authorities. Leading companies will have an advantage in future industry development, benefiting from the growth of the industry, and there is a possibility for a continued dominance by a small number of strong brands and producers.

Jingjia Technology, which has a complete industrial chain, is expected to take a leading position in the new market.

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