Vesync’s 1H 2022 Results Dragged by High Operating Costs; Recovery Expected in 2H

Vesync’s first-half 2022 net profit of USD 15.5 million fell 51.6% year on year, largely due to high freight costs, foreign exchange loss and rising staff costs. This should be no surprise given the profit alert issued earlier in August 2022. We cut our fair value estimate to HKD 7.90 from HKD 8.30, after lowering our sales assumption, and now see 2022 revenue growth at 17.9% year on year, down from 30.2% in 2021. We believe Vesync is undervalued, but slowing consumer spending in the U.S. and Europe, and Vesync’s short track record, are expected to weigh on investor confidence. Longer-term, growth should be underpinned by new products, as well as channel and geographical expansion. Our fair value estimate prices Vesync at 15.9 times 2023 price/earnings, which we see supported by a five-year projected EPS CAGR of 25.8%.