Company Reports

Vesync focuses on the online marketing and sale of self-designed and self-developed small home appliances and smart home devices, mainly through Amazon (more than 75% of sales in 2023). According to NPD Group, in 2023, Vesync’s Levoit air purifiers ranked first in the US in terms of sales value, with market share of 29%.

No-moat Vesync reported mixed results for the first half of 2024, as revenue missed our expectation but operating profit beat, given cost efficiency improvement. The 7% year-on-year top-line growth for the first half lagged the 19% that we had modeled for 2024, as soft demand for kitchen appliances clouded sales increase of home environment products. While Vesync’s Amazon channel saw a 3% sales decline year on year, non-Amazon channels posted an encouraging 47% growth, reflecting an initial success in diversification. More positively, operating margin increased to 17.1% in the first half compared with 9.4% a year ago, thanks to optimized unit and marketing costs. As such, we lower our 2024 top-line forecast by 9% but raise our operating margin assumption by 150 basis points to 15.5%, leading to minimal change in operating profit. We also maintain our long-run assumptions and HKD 6.80 per share fair value estimate for Vesync, and view its shares as underpriced despite the recent rally.

We transfer coverage of Vesync, a Chinese home appliance seller focusing on overseas markets. We maintain its no-moat rating, Very High Morningstar Uncertainty Rating and Standard Capital Allocation Rating. However, we cut our fair value estimate to HKD 6.80 per share from HKD 8.10 after raising the weighted average cost of capital, or WACC, to 11.5% from 9.5%. We think this better reflects Vesyncs elevated business risk, as entry barriers for small home appliances remain low and peers are entering the saturating developed countries markets. As the company ramps up its presence in non-Amazon sales channels, we also raise our marketing expense assumptions through 2033. Hence, our midcycle operating margin forecast is cut to 6.5% from 7.1%.

Vesync focuses on the online marketing and sale of self-designed and self-developed small home appliances and smart home devices, mainly through Amazon (more than 75% of sales in 2023). According to NPD Group, in 2023, Vesync’s Levoit air purifiers ranked first in the US in terms of sales value, with market share of 29%.

We keep Vesync’s fair value estimate at HKD 8.10 per share despite the disappointing overall gross sales data for first-quarter 2024. We think the firm remains undervalued, but the concerns about weaker consumer confidence will cap its near-term share price performance. We expect Vesync to deliver net profit CAGR of 17% over the next three years, underpinned by geographical expansion, offline channel penetration, and new product launches. We also believe the estimated 2024 dividend yield of more than 5% and ongoing share buybacks will support Vesync’s share price.

Vesync’s 2023 net profit of USD 77.5 million (versus 2022 net loss of USD 16.3 million) was in line with preliminary guidance provided in February. The strong results were attributed to increased sales at both Amazon and non-Amazon channels, lower international freight rates, cost-saving initiatives, as well as enhanced operational efficiency. In addition, 2022 results were affected by provisions for the voluntary recall of its air fryers. We raise Vesync’s fair value estimate to HKD 8.10 per share from HKD 7.40 after fine-tuning our earnings estimates and taking into account its higher cash in hand as at end-2023. We think the shares are undervalued with estimated 2024 dividend yield of about 5%, while the robust earnings recovery would gradually restore investor confidence. In particular, the 2023 dividend payout ratio of 40% and ongoing share buyback show that management is focusing on shareholder return. However, we believe near-term concerns about higher international freight rates and US tariffs will continue to weigh on share price performance.

Vesync focuses on the online marketing and sale of self-designed and self-developed small home appliances and smart home devices, mainly through Amazon (more than 75% of sales in 2023). According to NPD Group, in 2023, Vesync’s Levoit air purifiers ranked first in the US in terms of sales value, with market share of 29%.

Vesync expects 2023 earnings to be around USD 60 million-USD 85 million, versus net loss of USD 16 million in 2022. The net profit guidance is in line with our 2023 estimate of USD 74 million, and the firm attributed the strong recovery to increased sales at both Amazon and non-Amazon channels, lower international freight rates, cost savings initiatives, and enhanced operational efficiency. We believe the absence of provision for the voluntary recall of its air fryers in 2022 also contributed to the robust results. We maintain our earnings forecasts and fair value estimate of HKD 7.40. While Vesync remains undervalued, we think share price performance may be capped in the near term by concerns about rising international freight rates and higher U.S. tariffs. That said, in our view, the firm’s ongoing share buybacks should help to support share prices.

We maintain Vesync’s earnings forecasts and fair value estimate of HKD 7.40 after the release of its overall gross sales data for third-quarter 2023. We think the firm remains undervalued, but concerns over U.S. economic growth amid a high interest-rate environment may add volatility to the share price. That said, we believe Vesync’s share repurchase plan will support its share price performance. The firm announced in October that it will spend up to HKD 100 million for a share buyback (maximum 10% of the outstanding shares). This reflects management’s confidence in the firm’s long-term strategy and growth, in our view.

Vesync’s first-half 2023 net profit of USD 32.6 million more than doubled year on year and is in line with the profit alert issued in late July 2023. This is largely due to stronger sales, lower international freight rates, cost savings initiatives, and enhanced operational efficiency. After incorporating the latest results into our model, we increase our 2023-25 earnings forecasts by 42%-58% and raise our fair value estimate to HKD 7.40 from HKD 6.10. We believe Vesync is significantly undervalued currently, but concerns about slowing global economic growth and Vesync’s short track record may weigh on investor confidence.

Vesync focuses on the online marketing and sale of self-designed and self-developed small home appliances and smart home devices, mainly through Amazon (more than 80% of sales in 2022). According to NPD Group, in 2022, Vesync’s Levoit air purifier ranked number one in the United States in terms of sales volume and sales value, with market share of 33% and 23%, respectively.

Vesync guided that first-half 2023 earnings would increase by about 70%-120% year on year. The profit guidance is better than we expect, and the firm attributed the strong recovery to increased sales at both Amazon and non-Amazon channels, reduced costs on the back of lower international freight rates and other cost savings initiatives, as well as enhanced operational efficiency. Ahead of the upcoming results release expected by end-August, we maintain our earnings forecasts and keep our fair value estimate of HKD 6.10. While we think the strong guidance reinforces our undervalued call for Vesync, we believe investor confidence may remain hesitant with our view that U.S. GDP growth will slow to around 1% over the next three quarters. We think this may add volatility to the share price.

We keep no-moat Vesync’s fair value estimate at HKD 6.10 after the release of its overall gross sales data for first-quarter 2023. We think the firm remains undervalued, but the concerns on slowing global economic growth will cap its near-term share price performance. We expect Vesync’s earnings to rebound sharply in 2023, driven by the absence of costs associated with its air fryers product recall that had hurt 2022 earnings. For the first half of 2023, we think earnings growth of around 20% year on year is possible.

Vesync focuses on the online marketing and sale of self-designed and self-developed small home appliances and smart home devices, mainly through Amazon (more than 80% of sales in 2022). According to NPD Group, in 2022, Vesync’s Levoit air purifier ranked number one in the United States in terms of sales volume and sales value, with market share of 33% and 23%, respectively.

We cut Vesync’s fair value estimate to HKD 6.10 from HKD 6.80 following its disappointing 2022 earnings. The 2022 net loss of USD 16.3 million (versus net profit of USD 41.6 million in 2021) was mainly attributable to the impact of the voluntary recall of its airfryers. We think the firm remains undervalued, but it will need to restore investors’ confidence after failing to meet expectations for two consecutive years, although this is partly due to external factors such as channels destocking and sharp rise in freight rates. We believe it will take time to prove Vesync’s capability and a strong recovery in the firm’s earnings should help to rerate the stock.

Vesync focuses on online marketing and sales of self-designed and self-developed small home appliances and smart home devices, mainly through Amazon (more than 80% of sales in 2022). According to NPD Group, in 2022, Vesync’s Levoit air purifier ranked number 1 in the United States in terms of sales volume and sales value, with market share of 33% and 23%, respectively.

Vesync focuses on online marketing and sales of self-designed and self-developed small home appliances and smart home devices, mainly through Amazon (more than 90% of sales in 2021). According to Frost & Sullivan, Vesync ranked third in terms of retail sales generated through Amazon and fifth through all online channels in 2019 in the U.S., among small home appliances retailers. Its air purifiers ranked first and air fryers ranked second in their respective categories in 2019, in terms of retail sales generated through Amazon in the U.S. North America contributed more than 75% of Vesync’s sales in 2021.

We reduce Vesync's fair value estimate to HKD 6.80 from HKD 7.90 after cutting 2022-24 earnings forecasts by 11%-19%, to factor in slower near-term growth on the back of the impact from its product (air fryers) recall and macroeconomic uncertainties. We view the recall as having a limited impact on the company's reputation as it is addressing the issue quickly and there have not been any major accidents or injuries related to the use of their air fryers. Owners will receive a new product with the improved safety features. Although we think the shares are undervalued currently, the pending provision for the recall will likely cap share price performance in the near term. We remain positive on Vesync's long-term outlook, supported by improving product mix, channel and geographical expansions, as well as new product pipelines.

We maintain Vesync’s fair value estimate at HKD 7.90 after finetuning our earnings estimates. We have lowered our 2022-23 revenue forecasts by 2%-6%, to factor in slower U.S. gross domestic product growth, but our long-term growth assumptions are largely unchanged. Although we think the shares are undervalued, slowing consumer spending in the United States and Europe and Vesync’s short track record are expected to weigh on investor confidence, adding to share price volatility. Our fair value estimate prices Vesync at about 17 times 2023 price/earnings, which is supported by a five-year projected EPS CAGR of around 24%. In our view, it will take time to prove Vesync’s capability, but improving earnings and consumer sentiment should help to rerate the stock, which only trades at below 6 times 2023 P/E currently.

Vesync focuses on online marketing and sales of self-designed and self-developed small home appliances and smart home devices, mainly through Amazon (more than 90% of sales in 2021). According to Frost & Sullivan, Vesync ranked third in terms of retail sales generated through Amazon and fifth through all online channels in 2019 in the U.S., among small home appliances retailers. Its air purifiers ranked first and air fryers ranked second in their respective categories in 2019, in terms of retail sales generated through Amazon in the U.S. North America contributed more than 75% of Vesync’s sales in 2021.