Vesync Continues To See Near-Term Challenges on Macro Uncertainties; Shares Remain Undervalued

We lower Vesync’s fair value estimate to HKD 8.30 from HKD 9.20, after factoring in slower growth in the near term as inflation and recession fears eat into discretionary spending. We also increase our Morningstar Uncertainty Rating to Very High from High to reflect the murkier demand outlook and Vesync’s smaller scale versus its peers. We cut our 2022-26 earnings estimates by 11% on average, but we think the shares remain undervalued, underpinned by new products and geographical expansion. However, the firm’s performance may remain volatile given the short track record. It will take time to prove Vesync’s capability but improving consumer sentiment should help to rerate the stock, in our view. We think investors will focus on the firm’s demand and margin guidance in the upcoming results announcement in end-August.