RHB downgrades VS Industry to 'neutral'

KUALA LUMPUR: RHB Research has downgraded VS Industry Bhd to "neutral" as it believes the share price rally and current valuation could have priced in most of the positives.

The research house maintained its earnings estimates post-1QFY21 results briefing as there was no signifant change in management guidance on order volume.

It kept its target price at RM2.76, which represents 8% upside and 3% FY22 forecast yield.

"Looking ahead, the robust earnings growth momentum should be sustained by heightened sales orders from key customers stemming from higher global demand for consumer electronics and US-China trade war diversion.

"Meanwhile, the two new customers secured earlier in 2020 are expected to contribute progressively once the production lines are set up in 2021," said RHB.

It added that the benign margin expansion trend in the past two quarters should continue due to a more favourable product mix with sales from customers with higher margin set to increase at a faster pace.

In its post-results briefing, VS Industry said order flows from key existing customers remain largely itact whereas two new production for a US-based customer are set to be commissioned by December.

Management also said 2Q and 3Q would be slower compared to peak quarters in 1Q and 4Q.

It added that it is in ongoing discussions with several potential customers although a firm deal may only be struck by end-2021 at the earliest.
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RHB Research. VS Industry


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