Revenue grew well, and profitability recovered quickly. Vesync announced its 2023 results. In 2023, it achieved revenue of US$585 million, an increase of 19.4% year on year, and net profit to mother of US$77 million, reversing the year-on-year loss. The company plans to pay a dividend of HK$0.1569 per share. After experiencing the recall, the company's business situation quickly recovered, and revenue returned to a high growth rate; driven by cost-side factors such as raw materials, exchange rates, and shipping, the company's profitability reached a historically good level.
Channels are expanding rapidly. The company's non-Amazon channels expanded rapidly, with revenue growth of 61.2% to US$129 million in 2023, of which H1/H2 grew 87.7%/44.9% respectively, accounting for 22% of annual revenue. The Amazon channel maintained steady growth, with revenue growth of 11.2% to US$457 million in 2023, of which H1/H2 grew 13.9%/8.9% respectively. The company has quickly entered offline supermarkets around the world, including 11,000 in North America, 3,200 in Europe, and 1,900 in Asia Pacific. Channel diversification is progressing smoothly.
Revenue growth in the Asian region is strong. The company achieved rapid revenue growth in Asia, with revenue growth of 83.4% to US$0.3 billion in 2023, of which H1/H2 grew by 49.5%/120.0% respectively. The North American region's annual revenue grew 17.4% to US$430 million, and H1/H2 grew 15.7%/18.9%, respectively. Revenue in the European region increased 16.5% to US$130 million, with H1/H2 +52.2%/-7.1% respectively. The slowdown in European growth in the second half of the year is expected mainly due to the high base for the same period and the company's relatively lagging behind in the layout of high-capacity air fryers.
The main categories maintain their leading position, and new categories continue to expand. The company's air purifiers and humidifiers maintained the leading position in North America, driving Levoit's revenue growth of 18.3% to US$330 million, and H1/H2 growth of 19.8%/17.2%, respectively. Cosori kitchen appliances were driven by European air fryers and ovens, and revenue increased 17.4% to US$200 million, and H1/H2 increased 25.7%/10.5% respectively. Etekcity's revenue was driven by scales and grew 31.5% to $0.6 billion, while H1/H2 grew 38.7%/22.4%, respectively.
The gross margin reached a new high, and the cost ratio was optimized. Benefiting from raw materials, shipping costs and exchange rates, etc., the company's gross margin in 2023 increased 17.9pct year-on-year to 46.9%, reaching a new high. The company's sales expense ratio was -1.3 pct to 16.9% year on year, and the management expense ratio reached 14.2%, which was the same year on year. The company's profitability was quickly repaired, and the profit margin reached 13.2%.
Risk warning: Recovery in overseas demand falls short of expectations; risk of tariffs between China and the US; large fluctuations in raw material prices; large exchange rate fluctuations; increased industry competition; new products and channel expansion fall short of expectations.
Investment advice: Raise profit forecasts and maintain the “buy” rating.
The company relies on strong domestic home appliance manufacturing capabilities and localized insight, sales and operation capabilities to achieve continuous expansion of categories and channels in major overseas markets. Considering the rapid expansion of the company's new categories and offline channels, the profit forecast was raised. The company's net profit for 2024-2026 is expected to be 0.92/1.07/123 million (previous value was 0.74/0.86 billion US dollars), +18%/+17%/+15% year over year; diluted EPS = 0.08/0.09/0.11 US dollars, corresponding to PE = 8/7/6 times, maintaining the “buy” rating.