PETALING JAYA: Analysts are cautiously optimistic that VS Industry Bhd will see improvement in its earnings for the coming quarters, despite a looming global recession next year.
They said, among others, the plus points for the electronics manufacturing services (EMS) provider would be its strong ramp-up of sales orders and a stronger labour force, which bode well for its earnings growth trajectory.
Hong Leong Investment Bank (HLIB) Research said it foresees better earnings ahead from the ramp-up of the company’s utilisation rate, as the labour shortage has been remedied from the arrival of 3,700 foreign workers.
“At this juncture, we gather that supply chain and logistics issues are manageable, as the group has stocked up on certain raw materials with longer lead time,” it noted.
HLIB Research, which maintains a “buy” call on the stock, said after making housekeeping changes it has lowered its financial year 2024 (FY24) forecast marginally by 2.9%.
VS Industry’s net profit for the first quarter ended Oct 31, 2022 for financial year 2023 (1Q23) jumped 54% to RM60.71mil from RM39.39mil a year earlier mainly due to higher sales orders from existing key customers.
Revenue for the quarter rose 33.7% to RM1.29bil from RM967.99mil previously, while earnings per share stood at 1.58 sen against 1.03 sen previously. The company also declared an interim dividend of 0.5 sen to be paid on March 3, 2023.
CGS-CIMB Research said it expects revenue momentum to remain robust in 2Q23 on the back of a strong ramp-up in orders, as well as increased production for new models secured from customers.
UOB Kay Hian Research, which is also maintaining its “buy” call, said while VS is not spared from the weakening consumer demand, its main customers’ order rechanneling could be sufficient to make up for the shortfall.