Jul 10, 2020 05:53 PM

Investors Fire Up Hong Kong IPO for E-Cigarette Specialist

Shares of Smoore, the world’s largest company in the fast-growing vaping sector, more than doubled on their first day trading in Hong Kong.
Shares of Smoore, the world’s largest company in the fast-growing vaping sector, more than doubled on their first day trading in Hong Kong.

It was a smoking debut for e-cigarette specialist Smoore International Holdings Ltd.

Shares of the world’s largest company in the fast-growing vaping sector more than doubled on their first trading day, closing at HK$31 ($4) after selling for an IPO price of HK$12.40. The company raised HK$7.1 billion from the share sale, and ended its first trading day with a market value of about $22 billion.

Smoore is the leader in the emerging e-cigarette, or vaping, sector that has taken the world by storm in the last decade as a possibly safer alternative to smoking cigarettes.

But the sector also faces headwinds as many countries become alarmed by the number of people taking up the habit, especially young people, including many who might not have become smokers. Reflecting that outlook, increased regulation was one of the main risks highlighted in Smoore’s IPO prospectus.

Smoore has benefitted from being one of the oldest companies in the space. Its 44-year-old founder Chen Zhiping has more than 10 years of experience in the business, and holds about a third of the company’s shares. Smoore has used its veteran status to position itself as a key developer of vaping technology, including the ceramic heating technology that now accounts for about half of its revenue.

Despite the regulatory risks, the industry is still in a high-growth phase that has benefitted Smoore both on the top and bottom lines. The industry grew from $3.1 billion in 2016 to $6.7 billion last year, with Smoore now controlling about 16.5% of the global market, according to the company’s prospectus, citing third-party data.

Riding the industry’s rapid growth, the company’s revenue has roughly doubled in each of the last three years, including a roughly 120% gain last year to 7.6 billion yuan ($1.1 billion). Its profit has grown even quicker, nearly tripling last year to 2.17 billion yuan thanks to growing economies of scale that have led to fattening margins.

The company’s main customers are other businesses, with nearly 80% of its sales outside China. The U.S. is its largest market, accounting for 46% of sales last year. But its home market on the Chinese mainland is also growing quickly, climbing from 400 million yuan in 2018 to 1.6 billion yuan last year.

Smoore noted the Covid-19 pandemic hurt its business this year, with about a third of its capacity taken offline in the first quarter before coming back by mid-March. Despite challenges, it pointed out that it still managed 7.8% revenue growth in the first four months of the year. But the company’s far bigger challenge over the longer term will be regulation of vaping products.

A report from TF Securities said the market for new-style smoking products grew about 28% last year to $35.4 billion, accounting for 4.3% of the entire market for smoking-related products. But it also noted growing regulation was a global trend.

The potential dangers of vaping were in the spotlight last year when a large number of lung injuries were reported in the U.S. connected to the practice. During that wave, the U.S. Centers for Disease Control reported 2,807 hospitalizations and 68 deaths through February this year, according to the CDC’s website. The agency later determined that vitamin E acetate, an additive contained in some products, was strongly linked to the outbreak.

Contact reporter Yang Ge (

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