PETALING JAYA: VS Industry Bhd is expected to continue posting strong earnings growth for the remaining quarters of its financial year ending July 31,2021 (FY21), thanks to robust order flows from its key customers.
Backed by higher global demand for consumer electronics amid the proliferation of work-from-home trend and trade war diversions, the electronics manufacturing service provider has seen orders from its key customers increase.
On that note, most analysts remain optimistic of VS Industry’s prospects. CGS-CIMB Research, for instance, has reiterated its “add” call on VS Industry, citing the latter’s long-term earnings growth prospects. The brokerage has also raised its target price for the counter to RM3.12 from RM3 previously, as it rolled over its valuation to updated 2022 (from FY22) price-earning (PE) multiple of 19 times (from 20 times).
“We like VS Industry for its targeted customer diversification strategy, as it has proven to benefit from manufacturing diversions from trade tensions, ” CGS-CIMB Research said.
“We gather that the order outlook for VS Industry’s key customers remains strong, with several new product models starting commercial production progressively in the coming quarters, ” it added.
VS Industry’s net profit rose 60.5% to a record high of RM130.47mil for the first half ended Jan 31,2021, from RM81.27mil in the corresponding period a year ago. Its revenue grew 7.1% to RM1.99bil from RM1.85bil.
According to RHB Research, the robust earnings growth momentum should be sustained by heightened sales orders from key customers. “Rolling forecasts provided by such customers suggest a slight uptick in orders as compared to a quarter ago. This stems from higher global demand for consumer electronics on the back of the proliferating work-from-home trend and trade war diversions, ” it said.
RHB Research has raised its target price for VS Industry to RM2.93 from RM2.76 previously, but has maintained its “neutral” call on the counter. “We believe most of the positives are in the price at the current valuation, and we do not see fresh catalysts supporting a further upgrade in valuation/earnings forecasts at this point, ” it explained.
Meanwhile, UOB Kay Hian has maintained its “buy” call on VS Industry, with an unchanged target price of RM3.80, based on 20 times the forecast FY22 PE. “VS Industry is now back to its high-growth cycle again, offering a three-year net profit compounded annual growth rate of 28% (from FY19 to FY22) even from its peak year in FY19, ” it said.
Less enthusiastic, Maybank Investment Bank has cut its target price for VS Industry to RM2.85 from RM3.25 previously, based on an unchanged 20 times FY22 PE. It has maintained a “hold” call on the counter.