Vesync: Overall Gross Sales Indicate Robust Growth; Share Buyback Plan Is Positive

We maintain Vesync’s 02148 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.

In third-quarter 2023 Vesync’s overall gross sales, which exclude discounts and allowances, increased by about 27.2% year on year. In particular, Amazon channels grew by 17.6% while non-Amazon channels surged significantly by 95.8%, partly due to a lower base. These were underpinned by higher sales volumes of air purifiers, air fryers, air-fryer ovens, and tower fans in the U.S. and European markets. We are glad that the tariff exemptions for Vesync’s key products in the U.S. have been extended to end-2023 from end-September 2023 previously. We believe the tariff exemptions will likely be extended again as it will help to ease inflation in the U.S.

We expect Vesync’s 5-year revenue CAGR of 18.2% to be supported by geographical expansion, penetration of offline channels, as well as product launches. In addition, we forecast an average gross margin of 43.2% during 2023-27, underpinned by normalized freight rates and better product mix.