RLX Technology Q2 2026 Earnings Call: Margenausweitung und Wachstum in Europa

Wichtigste Erkenntnisse

• Der Nettoumsatz stieg im zweiten Quartal 2026 im Jahresvergleich um 14,8 % auf 1,01 Milliarden RMB, was hauptsächlich auf organisches Mengenwachstum im internationalen Geschäft und die Übernahme im Mai 2025 zurückzuführen ist. Auf internationale Märkte entfielen rund 70 % des gesamten Nettoumsatzes.
• Der Rohertrag stieg im Jahresvergleich um 47,8 % auf 357,8 Millionen RMB. Die Rohmarge erreichte 35,4 %, was einem Anstieg von 790 Basispunkten gegenüber dem Vorjahr und 360 Basispunkten gegenüber dem Vorquartal entspricht. Unterstützt wurde dies durch eine Optimierung der Lieferkette, höhere Fertigungsausbeuten sowie einen vorteilhaften geografischen und Produkt-Mix.
• Das operative Ergebnis (Non-GAAP) stieg im Jahresvergleich um 28,8 % auf 149,6 Millionen RMB. Dies ist das 11. Quartal in Folge mit einem positiven operativen Ergebnis (Non-GAAP) für RLX Technology. Der Nettogewinn (Non-GAAP) belief sich auf 238,8 Millionen RMB.
• Der Umsatz schwächte sich im Vergleich zum Vorquartal ab, nachdem das erste Quartal von vorgezogenen Lieferungen im Zusammenhang mit regulatorischen Exportanpassungen profitiert hatte. Das Management erklärte, die zugrunde liegende Nachfrage in den wichtigsten internationalen Märkten bleibe robust.
• RLX schloss im Juli 2026 den Erwerb einer Mehrheitsbeteiligung an einer westeuropäischen Vertriebsplattform ab. Das Geschäft wird ab dem dritten Quartal 2026 voll konsolidiert, was den ausgewiesenen internationalen Umsatz erhöht, aber die prozentuale Rohmarge des Konzerns senkt, da das Vertriebsgeschäft ein niedrigeres Margenprofil aufweist.
• Das Management rechnet damit, dass der Jahresumsatz in Festlandchina im Vergleich zum Vorjahr weitgehend unverändert bleibt, während die europäische Übernahme in der zweiten Jahreshälfte zu einem spürbaren Sprung beim ausgewiesenen Auslandsumsatz führen dürfte.

Wichtige Finanzdaten

Geschäfts- und operative Entwicklung

Die internationale Expansion blieb der Hauptwachstumstreiber von RLX Technology. Das Management führte das Wachstum im zweiten Quartal auf das organische Volumen im Ausland und den Beitrag des im Mai 2025 übernommenen europäischen E-Zigaretten-Unternehmens zurück.

Der Umsatz sank im Vergleich zum Vorquartal, da Lieferungen im ersten Quartal vor regulatorischen Exportanpassungen vorgezogen worden waren. RLX erklärte, man priorisiere den Abverkauf im Einzelhandel und gesunde Lagerbestände in den Vertriebskanälen, anstatt margenschwache Volumina in die Kanäle zu drücken.

Europa bleibt zentral für die Expansionsstrategie des Unternehmens. Der im Juli 2026 übernommene westeuropäische Händler beliefert direkt mehr als 30.000 Einzelhandelsverkaufsstellen und betreibt eine eigene B2B-Plattform, die über 20.000 unabhängige Händler verbindet. RLX beabsichtigt, diese als offenen Marktplatz für mehrere Marken weiterzuführen und gleichzeitig seine Skaleneffekte in der Lieferkette und seine Markenbeziehungen zu nutzen, um die Vertriebskosten zu senken und die Einkaufsbedingungen zu verbessern.

RLX expandiert zudem über E-Zigaretten-Produkte hinaus. Seine Produktlinie für moderne Nikotinbeutel zur oralen Anwendung wurde kommerzialisiert, wobei zusätzliche Produktionskapazitäten an einem im Bau befindlichen Fertigungsstandort in Südostasien geplant sind. Die Anlage wird mehrere Produktkategorien unterstützen, die Zollpositionierung verbessern und die Logistik optimieren. RLX verfügt darüber hinaus über Heat-not-Burn-Technologien und marktreife Produkte, die auf geeignete Markt- und Rahmenbedingungen warten.

Prognose des Managements

Das Management geht davon aus, dass die Konsolidierung der westeuropäischen Vertriebsplattform ab dem dritten Quartal 2026 in der zweiten Jahreshälfte zu einem deutlichen Sprung beim ausgewiesenen internationalen Umsatz führen wird. Das organische Wachstum wird weiterhin im Hinblick auf den Abverkauf und die Qualität der Kanalbestände gesteuert.

Es wird erwartet, dass die Rohmarge bei einer Normalisierung des Produkt-Mixes und der Lieferströme wieder in einen vom Management als gesund und ausgewogen beschriebenen Bereich zurückkehrt. Die Konsolidierung des margenschwächeren Vertriebsgeschäfts wird die prozentuale Rohmarge zwar verringern, das Management rechnet jedoch damit, dass die Transaktion das operative Ergebnis und den Nettogewinn in absoluten Zahlen steigern wird.

Für Festlandchina erwartet das Management, dass der Jahresumsatz im Vergleich zum Vorjahr weitgehend unverändert bleibt. Die Prognose spiegelt konservativere Zeitpläne für regulatorische Genehmigungen wider – trotz des strengeren Vorgehens gegen illegale E-Zigaretten-Produkte.

RLX plant, das Kapital auf organisches Wachstum, wertsteigernde M&A-Aktivitäten und Ausschüttungen an die Aktionäre zu verteilen. Aktienrückkäufe und Dividenden bleiben von der Zustimmung des Board of Directors und den Marktbedingungen abhängig. Übernahmeziele müssen dem Management zufolge einen klaren Zeitrahmen für die Kapitalrückzahlung bieten, strukturell verwässerungsfrei sein und zum Gewinn je Aktie (EPS) beitragen.

Risiken und zu beobachtende Bereiche

• Die internationalen Regularien werden detaillierter und restriktiver. Das Management verwies auf potenzielle Vorschriften im Vereinigten Königreich, darunter Einheitsverpackungen (Plain Packaging), standardisierte Geräte, Beschränkungen der Auslage im Einzelhandel, Geschmacksbeschreibungen und der Betrieb von Dark Stores.
• Die Übernahme des europäischen Vertriebsgeschäfts wird den Umsatz-Mix von RLX verändern und die konsolidierte prozentuale Rohmarge senken, auch wenn das Management von einem höheren absoluten Gewinn ausgeht.
• Zinsbewegungen und Fremdwährungsrisiken können zu Schwankungen führen, da RLX in Renminbi berichtet, aber Umsätze in US-Dollar und Britischen Pfund erzielt.
• Handelskonflikte, Zolländerungen und geopolitische Unsicherheit bleiben Faktoren hinter den Fertigungsinvestitionen des Unternehmens in Südostasien.
• RLX wartet auf behördliche Entscheidungen zu PMTA-Anträgen, die von nicht börsennotierten verbundenen Unternehmen eingereicht wurden. Das Unternehmens plant keinen großflächigen kommerziellen Marktstart in den USA, bis regulatorische Pfade und Durchsetzungsmaßnahmen eine bessere langfristige Planbarkeit bieten.

Höhepunkte der Analysten-Fragerunde

Kapitalallokation und M&A: RLX wird renditestarken organischen Investitionen Priorität einräumen, einschließlich produktkategorieübergreifender F&E, der Fertigung in Südostasien und Produkteinführungen. Zudem wird das Unternehmen größere Übernahmen in Betracht ziehen, die F&E, Fertigung, eigene Marken oder Vertriebswege stärken. Das Management hat keine feste Bewertungsobergrenze oder Umsatzschwelle festgelegt.

Auslandswachstum in der zweiten Jahreshälfte: Das Management erwartet ein diszipliniertes organisches Wachstum sowie einen erheblichen ausgewiesenen Umsatzbeitrag durch die Konsolidierung der neu erworbenen westeuropäischen Plattform ab dem dritten Quartal 2026.

Europäischer Wettbewerb: RLX sieht die produktkategorieübergreifende Umsetzung bei E-Zigaretten, modernen Nikotinbeuteln und Heat-not-Burn-Produkten als zunehmend wichtig an. Das Management hob die Effizienz der Lieferkette, die Produktentwicklung, Beziehungen zum Facheinzelhandel und eine stärkere Kontrolle über den lokalen Vertrieb als seine Wettbewerbsstärken hervor.

Nikotinbeutel: RLX plant, sein Portfolio an Nikotinbeuteln nach dem Hochlauf der neuen Produktionskapazitäten direkt mit seinem erweiterten Vertriebsnetz und seinen B2B-Plattformen in West- und Nordeuropa zu verknüpfen.

China und die USA: Das Management beurteilt das harte Vorgehen Chinas gegen illegale Produkte langfristig positiv, rechnet kurzfristig jedoch mit konservativen Genehmigungszeiträumen. In den USA wird RLX einen ROI-orientierten Ansatz beibehalten und auf eine klarere regulatorische Visibilität warten, bevor signifikantes Kapital eingesetzt wird.

Vollständiges Transkript der Telefonkonferenz zu den Quartalszahlen

Vollständiges Transkript der Telefonkonferenz

Ausführungen des Managements

Operator

Hello, ladies and gentlemen. Thank you for standing by for RLX Technology Inc.'s Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded and is expected to last for about 40 minutes.

I will now turn the call over to your host, Mr. Sam Tsang, Head of Capital Markets for the company. Please go ahead, Sam.

Sam Tsang

Thank you very much. Hello, everyone, and welcome to RLX Technology's Second Quarter 2026 Earnings Conference Call. The company's financial and operational results were released through PR Newswire services earlier today and have been made available online. You can also view the earnings press release by visiting our IR website at ir.relxtech.com. Participants on today's call include our Chief Executive Officer, Ms. Kate Wang; our Chief Financial Officer, Mr. Chao Lu; and me, Sam Tsang, Head of Capital Markets.

Before we continue, please note that today's discussions will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements typically contain words such as may, will, expect, anticipate, aim, estimate, intend, plan, believe, potential, continue or other similar expressions.

Forward-looking statements involve inherent risks and uncertainties. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, many of which are factors that are beyond our control.

The company's, its affiliates, advisers and representatives do not undertake any obligation to update these forward-looking information, except as required under the applicable law.

Please note that RXL Technology's earnings press release and this conference call include discussions of unaudited GAAP financial measures as well as unaudited non-GAAP financial measures. RLX's press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures.

For today's call, management will use English as the main language. We will also provide simultaneous interpretation on the Chinese line. Please note that the Chinese line is in listen-only mode and Chinese interpretation is for convenience purposes only. In case of any discrepancy, management statements in the original language will prevail.

I will now turn the call over to Ms. Kate Wang. Please go ahead.

Wang Ying

Thank you, Sam, and thank you all for joining today's call. We delivered solid second quarter financial and operational results, supported by our commitment to quality-driven resilience and compliant global growth.

Our top line grew 14.8% year-over-year in the second quarter, mainly driven by our expanding international footprint. Gross profit increased 47.8% year-over-year to RMB 367.8 million. As expected, revenue and gross profit moderated sequentially, not due to any softening in demand, but rather reflecting a trade inventory normalization following the first quarter's shipment pull forward driven by regulatory export adjustments. Because our distribution partners manage multi-brand portfolios, first quarter pre-stocking temporarily secured visibility into sell-out rates, leading to the shipment adjustments we saw this quarter.

Underlying demand across our key international markets remains healthy and resilient. Against this backdrop, we focused on two strategic priorities: sharpening retail execution and optimizing our global operational infrastructure. These deliberate refinements are designed to lay the foundation for our next era of sustainable, profitable growth. Rather than chasing low-margin volume, we are directing our capital towards building an agile, compliant global platform that can absorb regulatory shifts and quickly adapt to evolving demand.

Regulatory oversight across our international market is becoming more detailed and more restrictive enforced, from customs enforcement priorities to refined frameworks. The United Kingdom is a case in point. Proposed regulations cover plain packaging, standardized device authentic retail display bans, restricted flavor descriptions, and limits on dark store operations.

As an industry leader, we welcome these regulatory shifts. It poses the operational agility required to address them proactively. Engaging these stakeholders to foster high standard sustainable compliance frameworks.

Over the long term, clear and consistently enforced boundaries push out non-compliant, low-quality competition and raise barrier to entry. Our robust compliance infrastructure, R&D, and supply chain enables us to meet those standards early, enhancing our platform's operational predictability and long-term sustainability.

Our hands-on operational experience across international markets has taught us valuable lessons. In mature environments, traditional wholesaling model are no longer sufficient to sustain high-quality margin growth. As hardware technology and product standards stabilize, competition is shifting from pure product development to route-to-market execution.

Direct retail, promise proximity, and channel agility. As such, we are aggressively upgrading our distribution architecture through a targeted mix of direct channel investments, strategic distribution alliance, operational support, and channel innovation, and moving away from reliance on a single rigid distribution model.

In Asia, where our brand equity and consumer trust remains exceptionally strong, we are selectively broadening our footprint through localized commercial entities and proprietary channel models.

In Europe, where barriers to entry are higher, we are expanding through capital-efficient strategic partnerships and equity investments. By combining our world-class supply chain with local distribution leaders, we empower existing trading ecosystems while securing direct sell-out visibility and dedicated retail shelf space, establishing a durable competitive moat.

Europe is the cornerstone of our global growth strategy, where we are methodologically expanding our presence on the dual engine model with balanced targeted M&A with organic growth across channels.

In May 2025, we acquired a long-established European e-vapor company with an integrated local retail and online footprint and have been supporting its expansion as a collaborative partner ever since. Over the past year, this integration has brought us deep localized market insights and demonstrated the immense commercial value of aligning our global supply chain with trusted local operators.

Building on that acquisition, in July 2026, we made a strategic controlling investment in a leading B2B and FMCG physical distribution leaders in Western Europe. This entity has a robust offline footprint, directly serving retail end points across the market.

In B2B digital commerce, its proprietary ordering app connects with over 50% of independent retail points of sales in the country. Our integration philosophy centers on empowerment, not operational disruption. We do not intend to restructure their core operations or convert the platform into an exclusive outlet for our own products. They will remain an open multi-brand marketplace serving the broader retail ecosystem.

By applying our global supply chain scale and portfolio of brand relationships, we are confident that we can reduce these platforms' distribution costs and optimize sourcing terms.

While expanding our distribution reach, we are also accelerating our transformation into a multi-category, next-generation smoke-free product platform, extending beyond our leadership in e-vapor into a broader smoke-free portfolio. We have commercialized our modern oral nicotine pouch line and are steadily ramping up manufacturing capacity and the channel distribution.

In the heat-not-burn category, we hold extensive proprietary technology and patent reserves, as well as the pipeline of market-ready products awaiting optimal market and regulatory conditions for commercial launch.

To support these multi-category expansion and reduce our exposure to trade friction in the macroeconomic and geopolitical uncertainties, we are currently constructing a state-of-the-art manufacturing hub in Southeast Asia. The facility will cover multi-product categories, improve our tariff positions, and streamline logistics, supporting long-term sales resilience across our international markets.

Our mandate is clear: leverage our R&D capabilities, regulatory infrastructure, and newly strengthened route-to-market networks to capture market share and establish leading position across the global smoke-free ecosystem.

To sum up, we made meaningful progress this quarter, executing from a position of balance sheet strength. Our solid capital position gives us flexibility and the patience to say no to suboptimal, marginal, dilutive projects.

We remain financially disciplined, ensuring capital is deployed exclusively towards high-quality, value-accretive assets. By pairing direct channel control with multi-category product innovation, we are building a more resilient, diversified global platform structured to deliver sustainable long-term growth as the industry matures.

Now I will hand the call over to Chao to review our financial results in detail.

Chao Lu

Thank you, Kate, and hello, everyone. We delivered solid second quarter top line results with net revenues reaching RMB 1.01 billion, representing a 14.8% year-over-year increase from RMB 880 million in the prior year period.

Our top line growth was primarily driven by organic volume expansion in international markets, alongside incremental contributions from our acquisition completed in May 2025. For the quarter, international revenues remained our principal growth engine, accounting for approximately 70% of total net revenues.

As anticipated, second quarter net revenues moderated sequentially from first quarter 2026, which benefited from a one-time policy adjustment boost.

Turning to profitability. Gross profit rose 47.8% year-over-year to RMB 357.8 million in the second quarter. Gross margin expanded sequentially to 35.4%, up 790 basis points year-over-year and up 360 basis points sequentially, mainly due to supply chain optimization, manufacturing yield improvement, and favorable geographic and product mix shift.

We delivered our 11th consecutive quarter of positive non-GAAP operating profit, driven by top line expansion, favorable product mix and disciplined operating cost control. Non-GAAP income from operations reached RMB 149.6 million, up 28.8% year-over-year. Non-GAAP net income for the quarter stood at RMB 238.8 million.

Now let me provide additional financial and strategic context regarding the Western European transaction Kate highlighted earlier. In July 2026, we made a controlling investment in one of Western Europe's leading distributors of next-generation smoke-free products and FMCG goods. This entity brings two strategic assets to us, an extensive offline network directly serving over 30,000 retail endpoints across key national accounts and specialized retail, and a proprietary B2B digital commerce platform, connecting over 20,000 independent merchants. We expect to unlock significant operational and supply chain synergies from this transaction.

Furthermore, we are confident we can enhance this platform's margin profile over time by integrating RLX's global supply chain scale and brand portfolio. The entity's financial and operational results will be fully consolidated into RLX Technology's financial statements starting in the third quarter of 2026.

Behind our financial and operational progress is a deep commitment to corporate sustainability and long-term value creation. We published our 2025 ESG report this quarter, highlighting our advancements across corporate governance, product quality and safety, youth access prevention protocols, supply chain labor ethics, and environmental stewardship. From expanding employee welfare initiatives to enforcing ESG compliance across our supplier base, we continue to elevate our standards.

Furthermore, by embedding eco-friendly materials and adhering to responsible marketing practices, we ensure our expansion in both ethical and sustainable. Integrating these ESG principles into our core operations strengthens trust amongst adult consumers, regulators, employees and commercial partners, creating enduring value for all stakeholders.

Our robust balance sheet continues to serve as the bedrock of our global expansion strategy. As of June 30, 2026, our total capital resources, comprising cash, cash equivalent, restricted cash, short-term bank deposits and liquid investment securities stood at RMB 13.9 billion.

In closing, our second quarter performance underscores our operational and financial strength. Supported by this quarter's structural gross margin expansion, disciplined capital allocation and a healthy balance sheet, we are well positioned to strengthen our market leadership and deliver long-term value to our shareholders.

Thank you. Operator, we are now ready to take questions.

Operator

[Operator Instructions] The first question today comes from Christine Peng with UBS.

Fragen und Antworten

Christine Peng

Thank you, management, for the results summary as well as the strategy outlook. So I have two questions for the management. So the first question is about the capital allocation strategy. Obviously, Mr. Lu just mentioned there is abundant cash resources on the balance sheet. So I was just wondering what's going to be the capital allocation strategy going forward by leveraging on this very strong cash balance.

The second question is about the acquisition strategy, which has become a very important driver of the company's development going forward. So I was wondering what is the criteria in terms of valuation multiple as well as the revenue and profit contribution from the acquisition going forward?

Sam Tsang

Thank you, Christine, for your two questions. So the first question is on the capital allocation strategy. Our capital allocation strategy is financially disciplined and designed to drive sustainable long-term total shareholder returns. We allocate capital across three core priorities. The first one is organic growth and high ROI core business initiatives. This includes funding multi-category R&D, supply chain localization, specifically our manufacturing hubs currently under construction in Southeast Asia and strategic product launches. When regulations and tariff shifts in a given market, we take an ROI-gated approach. Sustainable organic growth remains our primary engine.

Second, we selectively deploy capital into highly accretive M&A. We target assets that boost strategic capabilities across R&D, local manufacturing, proprietary brands, and route-to-market distribution, while meeting clear financial standards.

Third, we remain committed to direct shareholder returns. Our strong cash generation and liquid capital reserves allow us to consistently reserve excess capital for systematic share repurchases and dividend distributions, subject to Board approvals and prevailing market conditions.

Regarding your second question about our M&A criteria, we do not have a specific valuation cap or top line contribution threshold, but we do adhere to strict financial and operational standards.

On valuation, we benchmark targets directly against transaction comparables and our own public trading multiple. Every potential transaction must have a clear time line for a cash payback, be structurally non-dilutive and generate EPS accretion.

In terms of execution, we actively empower our investing company by providing capital support, supply chain integration, procurement optimization, and operational capabilities to unlock structural value. While we prioritize strategic fit and synergy potential across arbitrary size stores, our fitness operational bandwidth means we intentionally focus on larger-scale opportunities that can move the financial needle and meaningfully enhance our global infrastructure.

In summary, we deploy capital only where discipline -- where valuation discipline and clear strategic synergies full align. Thank you very much for your questions.

Operator

The next question comes from Lydia Ling with Citi.

Lydia Ling

Management, this is Lydia from Citi. I also have two questions. So first one is on what's your expectation on the overseas growth in the second half of the year and especially considering the -- both from the acquisition as well as the organic growth in the overseas market?

And my second question is on the margin side and what's your outlook for the second half, especially like considering the acquisition impact on your operation or profitability?

Sam Tsang

Thank you very much, Lydia, for your questions regarding our growth outlook and margin expectations. So regarding our growth outlook for the second half of the year, we are taking a quality focused pragmatic approach to driving international growth.

On organic performance, we are prioritizing retail sell-through velocity and channel inventory health rather than pushing volume into channels at any cost. This prudent recalibration established a solid, sustainable baseline for our ongoing operations.

In addition to our organic baseline, the financial consolidation of our newly acquired Western Europe distribution platform starting in the third quarter will deliver a step change increase in reported international revenue growth for the second half.

Beyond the immediate top line expansion, we anticipate compounding commercial synergies across medium to long term. While our organic growth rates reflects disciplined inventory management, the consolidation of our European platform, combined with operational synergies, gives us full confidence in delivering strong overall overseas performance in the second half.

Regarding our margin trajectory, the gross margin expansion observed in the second quarter was primarily driven by temporary product and revenue mix shift. As our product mix and shipment flows normalize in the second quarter, we expect gross margin to settle back a healthy balanced range.

While non-operating factors such as macroeconomic interest rate movements and foreign exchange dynamics from reporting in renminbi, while generating revenue in U.S. dollars and sterling may create minor headline fluctuations, we maintain strict operational cost controls.

Regarding our European acquisition, as we mentioned earlier, starting in the third quarter, we will consolidate the Western Europe downstream distribution platform. Distribution businesses naturally operates on a lower percentage gross margin profile than proprietary brand operations. Consequently, while percentage margins will reflect this structural mix shift on an absolute dollar basis, this transaction will meaningfully expand our operating profit and net profit scale. Thank you for your questions.

Operator

The next question comes from Yun Guo with Citic.

Yun Guo

Management, I also have two questions. And the first question is about the U.S. market. British American Tobacco is preparing to sell flavored e-cigarettes in the U.S. starting in the fourth quarter. What is our forward strategy for the U.S. market?

And the second question is about the domestic market. With the regulations on the illegal e-cigarettes becoming increasingly strict in China, what is the impact on the company?

Sam Tsang

Thank you for all your questions. One is on the U.S. market and the other one is on the China market. So for the U.S. market, we closely monitor U.S. regulatory developments and peers' action regarding PMTA enforcement. While adult smoker demand for diverse alternative proceeds, regulatory compliance and visibility remain the critical determinants for long-term commercial commitments in the U.S.

Our strategic stance towards the U.S. market is disciplined, agile, and strictly ROI-driven. Notably, our non-listed affiliates previously submitted PMTA applications, which are currently in advanced stages, awaiting regulatory approvals.

However, we will not commit large-scale capital growth to aggressively commercial rollouts until regulatory pathway and enforcement standards provide long-term credibility. In the interim, we are directing our capital and management bandwidth towards regulatory transparent markets across Europe and Asia, alongside scalable reduced risk categories such as modern oral nicotine pouches.

Regarding your question on the Mainland China markets, we view the tightening domestic regulatory environment and crack down on illegal non-compliant products as an overwhelming positive long-term development for the industry and for our company as well.

Eliminating illicit trade restores order to retail channels, removes bad actors and redirect consumer demand back to legal tax-paying brands like us. In the near term, as regulatory bodies intensify enforcement and refine administrative oversight, procedural time line for government approval has become more conservative.

Accordingly, we have adopted a prudent baseline in our internal forecasting and expect Mainland China sales for the full year to be broadly flat year-over-year. We remain in full compliance and continue to work closely with the regulators to support a transparent, legally compliant industry ecosystem. Thank you for your questions.

Operator

The next question comes from Zoe Zou with CICC.

Yuying Zou

Management, this is Zoe from CICC. I have two questions. First, with Philip Morris' growth rapidly in Europe, how do you see competition evolving ahead?

Secondly, could you walk us through the strategic plan for new categories like oral pouch?

Sam Tsang

Sure. Thanks Zoe, for your questions. So one is on the European market competition and the second one is on the oral nicotine pouches.

So for the first one, while we do not directly comment on our peers, multi-category execution across vaping, modern oral, and heat-not-burn tobacco products has clearly become mandatory for all major industry participants. While legacy tobacco companies have the capital to pay for key account listing fees, RLX holds distinct competitive advantages.

First, we are a pure-play non-cigarette business, meaning we are fully committed to harm reduction and replace combustible cigarettes without any internal channel conflict.

Second, we possess strong supply chain efficiency and product innovation capabilities, which combined with our deep relationships in specialty vape retail, position us to expand further into large chain channels.

Furthermore, through our strategic investments, we are actively strengthening our route-to-market and shelf space control. Combining our agile supply chain with direct control of local distribution gives us strong confidence in capturing market share across Europe.

So regarding our plans of the nicotine pouches, we think that modern oral nicotine pouches represents a principal growth driver in our business expansion. We have embedded specialized pouch production lines into our manufacturing hub currently under construction in Southeast Asia.

Once construction is complete and production ramp-ups, this facility will ensure supply chain resilience, scale and cost efficiency. Upon scaling, we will plug our oral pouch line directly into our strengthened European distribution architect, giving immediate access to retail point of sales and B2B platforms across Western and Northern Europe. Supported by a dedicated internal team, we are leveraging our proprietary R&D capabilities to continuously optimize product attributes. We are confident that our modern oral pouches will become a meaningful contributor to revenue and profits in the future. Thank you very much for your questions.

Operator

Due to time constraints, now I would like to turn the call back over to the company for closing remarks.

Sam Tsang

Thank you once again for joining us today. If you have further questions, please feel free to contact RLX Technology's Investor Relations team through the contact information provided on our website or Piacente Financial Communications.

Operator

This concludes this conference call. You may now disconnect your lines. Thank you.