KUALA LUMPUR: RHB Research has maintained its Buy call on VS Industry with a target price of RM2.95 which is based on a recurring FY16F P/E of 10 times.
In a note on Thursday, the research house said this is broadly in line with its closest peer, SKP Resources' 11 times valuation.
The stock is currently trading at an undemanding FY16F P/E of 7.8 times relative to its three-year earnings CAGR of 21.3%, it said.
RHB added that VS Industry’s RM35.2mil 1QFY15 earnings were above its expectations.
"Earnings rose 268.4% on-year on the back of higher sales, EBIT margin expansion and tax incentives from its enhanced exports initiatives. An interim dividend of three sen per share was declared for the quarter under review," it noted.
As 1QFY15 earnings were above expectations, RHB has raised its FY15-16 EPS forecasts by 3-8% respectively after updating sales and margins assumptions, the enlarged share base from conversion of ESOS and taking into account the seasonal sales weakness from November-April.
"We also take the opportunity to introduce our FY17 projections. Key risks to our recommendation includea weaker-than-expected global economic environment that could dampen sales and dependence on orders from key customers," it said.
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