Electronic cigarette tobacco industry has the potential to change We remain optimistic about the growth prospects for electronic cigarette products, and that it has the potential to change the tobacco industry. Medium and long term, we believe that the electronic cigarette will extend the duration of the tobacco industry profits, and even promote the industry overall profit growth accelerated. But manufacturers, the three major tobacco manufacturers could have become the winner is not yet clear, because in the electronic cigarette while growth will accelerate the decline of traditional cigarette sales, profit margins will be eroded first, followed over time may rise. We maintain our Lorillard (LO) and Altria (MO) as well as a neutral rating Reynolds American (RAI) Sell rating. In the field of electronic cigarettes, Lorillard has a good first-mover advantage, Altria risk is highest. 2020 electronic cigarettes account for the entire tobacco industry profits 15%, while the share will decline in conventional cigarettes Electronic cigarette sales volume over the past two years, every year to grow to twice its original, its awareness, trial and repeat usage absorption rates continue to improve. Electronic cigarette is currently less than 1% of total industry sales, but we think 2020 will account for electronic cigarettes or tobacco industry sales overall, 10% of sales and 19% of 15% of EBIT. Electronic cigarette growth may be in the cost of cigarettes, we expect 2020 industry profits accounted for the proportion of the latter from the current 82% to 63%. Within a single box with a long-term profit growth Settlement payments and without paying due tax rate may be lower, the electronic cigarette may be able to generate higher profits than cigarettes (cigarettes equal amount calculated). Therefore, the three major manufacturers may not necessarily be the field of electronic cigarette cigarette replicate the current market share. In the long run, assuming that cigarette electronic cigarette will be completely seize market share, we expect that the Big Three's market share in sales only reached its current share of 59 percent, we can achieve the same EBIT. The impact on the Big Three: Profit Will be eroded barrier? Despite the current adjustment pursuant to our electronic cigarette tobacco stocks on U.S. investment themes too early, but we think the market structure in which the Big Three may be changing, but not all companies are able to become the ultimate winner. We believe that the best layout to date Lorillard, because the company has the first-mover advantage, and its products can be seized cigarette market share is limited. Altria slow to respond, and in cigarette EBIT in the proportion of up to 55%, so the risk is highest.