【行业研究报告】VESYNC-Some brands may turn around faster than the industry

SomepeerslikeHelenofTroyraiseditsguidanceforthefirsttimesinceJan2022.
Webelievecyclebottomfortheindustryislikelytobein2023andsomebrands
couldrecoverfaster.Therefore,weupgradeVesynctoBUYandraiseTPto
HK$6.23,basedon16xFY23EP/E(upfrom13x),similartoindustry’saverageof
17x.Itisnowtradingat12xFY23EP/Eand0.8xPEG,whichisnottoodemanding.
FY22Ewasstillunderpressure.Duetosluggishdemandin3Q22,we
expectVesync’ssell-outGMVYoYgrowthtobeat~30-40%inFY22E(~35%/
expectVesync’ssell-outGMVYoYgrowthtobeat~30-40%inFY22E(~35%/
~25%growthin1H22/2H22E).Also,becauseofAmazon’sde-stockingin2Q-
4Q22,sell-inGMVgrowthcouldbeevenslower,henceweforecastonly~15-
25%growthinFY22E(~20%/~15%inin1H22/2H22E).Asaresultof
businessmodelchangesinEU(shiftingfromSellerCentraltoVendorCentral)
andmore-than-expectedcouponsgiven(thatmaydeductsalesdirectly),we
expectlistedcolevelsalesgrowthtobeat~10%inFY22E.Netprofitcould
alsobeunderpressure,andmayfallby~12%inFY22E,dueto:1)lower-
than-expectedGPmargin,withmoreretaildiscountsgiveninordertodrive
salesastheindustryishighlypromotionalin2H22E(retaildiscountsare
higherat30%offduringtheCyberWeek2022vs26%offin2021,according
tosalesforce)and2)thesubsequentoperatingdeleverage.
ButweareconservativelyexpectingaturnaroundinFY23E.However,
comparingtoFY22E,wehaveturnedmorepositiveaboutFY23E,because:
1)sell-outGMVgrowthhasmarginallyimprovedinNov2022(roughly30-40%
growthduringCyberWeek)andthetrendissustainingintoDec2022,2)
inventoryclearancebyAmazoncouldbeoversoon,asVesync’sinventory
daysalreadyfelltoabout40daysinNov2022(vs70to80daysinJan2022),
3)freightratesarenowmuchcheaper,withWCIIndexfallingtoonly~3,000
USDper40footbox,a70%+dropYoY,4)morenewproductlaunchesand
categoryexpansion(likeLevoit’sHumidifier,~100%growthinFY22Eand30-
40%growthinFY23E,andCosori’sAirfryersandOvens),and5)morenon
Amazonchannels(offlinepenetrationinUS(esp.Walmart),UK,Germanyand
Japan).Hence,weexpect19%/60%sales/netprofitgrowthinFY23E.
UpgradetoBUYandraiseTPtoHK$6.23asthebottomshouldbenear.
Wefine-tuneFY22E/23E/24Enetprofitby-7%/-4%/+1%,tofactorin:1)
slowersalesgrowth,2)lowerGPmargin(morediscounts)and3)higher
operatingdeleverage.Currentvaluationof12xFY23Eisnottoodemanding
givenfasterthanpeers’sales/netprofitgrowth(at16%/34%),itsPEGof0.8x
isrelativelyattractive(JSGlobalisonlyat10xwithslowergrowth).However,
sincecyclebottomshouldbenear,wenowupgradeittoBUYandraiseTPto
HK$6.23,basedon16xFY23EP/E(upfrom13x),vs3-yearaverageof15x.