AmInvestment Bank said the integrated electronics manufacturing services provider has seen an uptick in production that is set to benefit the group.
PETALING JAYA: VS Industry Bhd
is projected to enter an earnings growth cycle over the next three years, according to AmInvestment Bank Bhd.
The group’s main customers, which consist of household appliance companies, a coffee brewer and a pool cleaner, collectively contributed 76% of its revenue in financial year 2024 (FY24).
The research house said the integrated electronics manufacturing services provider – operating in Malaysia, Indonesia and the Philippines – has seen an uptick in production that is set to benefit the group.
Its Philippines operations are set to commence in April this year, driving an anticipated earnings growth of 44% year-on-year for FY25.
“Broadly within our expectations, guided FY26 revenue contributions from the Philippines are RM800mil.
“While the total value of orders secured is RM1.2bil, it will take time for production to ramp up,” AmInvestment Bank said.
As this is VS Industry’s first expansion to the Philippines, the research house said certain processes will still need to be supported by its Malaysian operations.
Still, the expected revenue contributions from the Philippines for FY25 and FY26 are projected at RM300mil and RM1.2bil, respectively.
Despite the solid earnings growth, AmInvestment Bank said VS Industry is not taking a break, rather it is currently in a bidding process for three new models from a customer.
“The models have a cumulative value of RM1.4bil, which will add 26% to FY26’s revenue.
“The decision for this bidding could be made as early as the first quarter of this year,” the research house said.
It added that the group is also in discussion with a new medical device customer.
“The group also has capacity to take on a new anchor customer, with annual revenue potential of up to RM1bil,” it noted.
“We see upside to margins as sales recover. FY24 margins stood at 4.3% versus its FY21 peak of 6.8%.
“As volumes improve, our estimates factor in a recovery in margins,” it added.
In line with this, AmInvestment Bank has maintained its “buy” call on VS Industry with a target price of RM1.45 per share, offering a 38% upside.
It noted that risks include any downward revisions in customer orders, which could impact VS Industry’s revenue.
