Investment Rating - The report maintains a BUY rating for Vesync with a target price of HK 4.33 [2][5][15]. Core Insights - Despite slow sales growth in 1Q24, the end-demand remains healthy, supported by a strong sell-out growth and low inventory levels in the Amazon channel. The company expects orders growth to normalize in the upcoming quarters [2][8]. - The management has reiterated its FY24E guidance of over 20% sales growth and over 10% net profit margin, which aligns with the analyst's conservative positive outlook [2][8]. - The report highlights that Vesync's gross sales growth was only 1% in 1Q24, attributed to supply issues and reduced orders from Amazon, while non-Amazon channels saw a significant growth of 38% [2][8]. Financial Summary - Revenue is projected to grow from US 675 million in FY24, representing a year-over-year growth of 15.3% [3][14]. - Net profit is expected to increase from US 91.4 million in FY24, with a net profit margin improvement from 13.2% to 13.5% [3][14]. - The gross profit margin is anticipated to stabilize at 46.0% in FY24, slightly down from 46.9% in FY23, while the operating profit margin is expected to be around 15.3% [3][14]. Growth Outlook - The report projects a compound annual growth rate (CAGR) of 13% for sales and 16% for net profit from FY23 to FY26E, indicating robust growth potential [2][8]. - Specific brands under Vesync, such as Levoit and Cosori, are expected to achieve sales growth of 15% in FY24E, driven by new product launches and category expansions [8][10]. Valuation Metrics - The current valuation of Vesync at 7x FY24E P/E is considered attractive compared to its historical average of 12x, suggesting a favorable investment opportunity [2][5][15]. - The report notes that the average inventory days for major retailers have decreased, indicating improved channel inventory health, which bodes well for future sales [8][10].
1Q24 was slow but end-demand is healthy