Vesync Earnings: Strong Recovery Expected; Geographical and Channel Expansion to Drive Growth

Vesync’s 2023 net profit of USD 77.5 million (versus 2022 net loss of USD 16.3 million) was in line with preliminary guidance provided in February. The strong results were attributed to increased sales at both Amazon and non-Amazon channels, lower international freight rates, cost-saving initiatives, as well as enhanced operational efficiency. In addition, 2022 results were affected by provisions for the voluntary recall of its air fryers. We raise Vesync’s fair value estimate to HKD 8.10 per share from HKD 7.40 after fine-tuning our earnings estimates and taking into account its higher cash in hand as at end-2023. We think the shares are undervalued with estimated 2024 dividend yield of about 5%, while the robust earnings recovery would gradually restore investor confidence. In particular, the 2023 dividend payout ratio of 40% and ongoing share buyback show that management is focusing on shareholder return. However, we believe near-term concerns about higher international freight rates and US tariffs will continue to weigh on share price performance.