PETALING JAYA: VS Industry Bhd
(VSI) has had a weak start in the first quarter of its financial year 2025 (1Q25), weighed down by higher costs and unfavourable foreign exchange rates.
Another factor that contributed to the 39% year-on-year decline in core net profit for the integrated electronics manufacturing services provider was an elevated tax rate, which further compressed margins.
Contributions from Singapore were also lower, but this was offset slightly by a turnaround in Indonesia.
Despite the soft 1Q25 earnings, research houses said VSI is optimistic about prospects for its financial year 2025 (FY25), supported by strong sales momentum in Malaysia, new model launches, and a production ramp-up in its soon-to-be-completed Philippines facility.
Maybank Investment Bank Research (Maybank IB Research) said the recent streamlining and expansion efforts undertaken by VSI should support margin improvement and partly offset losses from non-performing operations and startup costs for the Philippines operations.
“Contributions from the Philippines as mass production ramps up, along with a prospective medical-product customer, are expected to drive VSI’s medium-term earnings growth, with more significant impact from FY26 onwards.
“Beyond that, we are only assuming organic growth for now, pending greater visibility on orders,” the research house said.
It said that the group expects higher contributions from a US-based customer and a coffee brewer with new model rollouts starting in 3Q25.
According to the research house, the US customer’s orders remain strong, partly boosted by a global supply chain shift.
“Orders from its other key customers, including one US-based and another coffee brewer, are expected to strengthen in the second half of VSI’s FY25 (2H25), driven by upcoming model launches.
“This would provide for stronger 2H25 earnings following a softer 1H25.
“Meanwhile, its pool-cleaning customer orders remain stable, with higher seasonal demand anticipated in 2Q25 and 3Q25.”
Maybank IB Research is maintaining its FY25 earnings forecast, and has a “buy” call on the stock with a target price of RM1.28 based on an unchanged 20.5 times 2025 price-earnings ratio.
However, CIMB Research has revised downward its FY25 to FY27 core earnings per share forecasts by 4% to 11% to reflect higher startup costs for its Philippines operation and lower contribution from subsidiary HT Press Work Sdn Bhd (HTPW).
The research house also lowered the stock’s target price to RM1.38 from RM1.44, adding that HTPW incurred a RM7mil loss in 1Q25 mainly due to lower yields for an existing consumer-electronics product.
VSI had increased its stake in HPTW in 2023 as part of its vertical integration initiatives aimed at driving margin expansion by leveraging HPTW’s expertise in metal stamping, tooling design, fabrication, machining, and surface finishing.
The group intends to leverage these enhanced capabilities to secure more in-sourcing projects.
