Cost Pressures Easing for Vesync, but Macroeconomic Uncertainties Remain; Shares Undervalued

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.