Product Recall a Near-Term Negative for Vesync; Cutting FVE to HKD 6.80

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.