Net profit of 29.35%, selling e-cigarettes to foreigners is a highly profitable business

How should AI and overseas market expansion respond to regulatory risks?

On March 13, leading e-cigarette company Fog Core Technology (under the brand RELX) released its 2025 financial report, showing a turnaround from previous sluggish performance: net revenue of 3.959 billion yuan, up 44.0% year-over-year; under non-U.S. GAAP, adjusted net profit for the year was 1.162 billion yuan (net profit margin 29.25%, explosive profit!), a 23.5% increase year-over-year. In the fourth quarter, net revenue was 1.141 billion yuan, up 40.3%; under non-U.S. GAAP, adjusted net profit was 322 million yuan, up 27.6%.

Despite the impressive performance, Fog Core’s stock did not surge and continued to decline on March 16. It seems investor concerns about heavy regulation in the e-cigarette industry remain unresolved. On March 15, convenience store leader Meiyijia was found by Guangdong Tobacco Monopoly Bureau to have sold over a million counterfeit cigarettes, causing jitters in the convenience store sector.

In 2021, Fog Core Technology was a highly profitable company with annual revenue of 8.5 billion yuan and profit exceeding 2 billion yuan (net profit margin 23%), with a market value approaching $19 billion (over 130 billion yuan). Starting October 1, 2022, China banned the sale of flavored e-cigarettes except tobacco flavor. Previously, Fog Core’s products included many fruit and other flavors, leading to product discontinuation and delayed new product development. From November 1, 2022, e-cigarettes were included in the scope of consumption tax, with a production (import) tax rate of 36% and wholesale rate of 11%, directly squeezing Fog Core’s profit margins (a 28.82% decrease year-over-year in 2022 and a 69.93% decrease in 2023). Authorities also required Fog Core to obtain a tobacco monopoly production license and prohibited online sales, cutting off key sales channels (originally through online direct sales and franchise models in malls and other venues).

Heavy regulation caused Fog Core’s performance to plummet, with 2023 revenue dropping to only 1.244 billion yuan and a market value around $2 billion. However, as small and medium-sized e-cigarette companies are cleared from the market, its domestic performance has gradually stabilized (holding over 42% market share). More importantly, the company has expanded into international markets—selling e-cigarettes abroad, with international revenue accounting for 76.5% in Q4 2025. Yet, tobacco remains a major source of tax revenue in many countries. Will Fog Core face similar regulatory challenges overseas, leading to significant performance fluctuations? This is likely the biggest risk facing the company.