We primarily use DCF to value RLX Technology as we believe this best captures the company’s high growth profile. Our DCF-based TP is US$2.5, with an 11.0% WACC and a 3% terminal growth rate.

Key downside risks that could cause RLX's shares to trade below our target price include: 1) regulation uncertainties; 2) slower-than-expected international expansion; 3) intensified industry competition; 4) adverse publicity about the long-term health risks of e-vapor products could impact demand.

Key upside risks include 1) faster-than-expected international expansion and market share gain; 2) successful new product launch; 3) loosening regulation in e-vapor industry.