VSI’s management is maintaining its FY26 revenue target of RM4.2bil.
PETALING JAYA: VS Industry Bhd
(VSI) may see earnings moderation for the second quarter of its financial year ending July 31, 2026 (2Q26), on seasonally slower customer ramp-ups, led by inventory drawdowns last December and unfavourable currency movements, analysts say.
However, a narrowing of losses from previously loss-making operations should partially cushion the softer topline, said UOB Kay Hian (UOBKH) Research.
The research house said it expects a clear inflection of electronics manufacturing services (EMS) provider’s second half of financial year 2026, supported by new model ramp-ups at its Philippine facilities and the start of new product lines for some of its customers.
VS Industry Philippines Inc is a significant expansion for the electronics manufacturer, established in late 2024 with a facility in Santo Tomas, Batangas, to fulfill new consumer electronics orders.
It is projected to generate RM1.5bil in revenue over two years, focusing on localising operations like plastic molding while ramping up assembly for key global clients.
This sets the stage for stronger volume, better absorption and margin recovery into financial year 2027 (FY27), the research house added.
For 1Q26, VSI delivered a sharp turnaround, with core earnings of RM24mil after a lacklustre 4Q25.
UOBKH Research maintained its “buy” call on VSI with a target price of 70 sen a share, based on 16 times the price-to-earnings ratio for FY26.
VSI highlighted that prevailing industry headwinds, particularly tariff-related pressures, are likely to continue weighing on profitability across the contract manufacturer and EMS industry at least through FY26.
VSI said, to navigate the challenging operating environment, it had decided to partially share the tariff burden with customers in exchange for higher order volumes.
While this will continue to lead to near term margin compression, the current low-margin landscape is also driving a natural industry shake-out.
This accelerates a survival-of-the-fittest phase where weaker players are exiting the market, creating opportunities for market share consolidation by established and resilient players such as VSI, UOBKH Research said.
“Although there had been some tapering in orders for certain existing models from one of VSI’s customers, this is expected to be offset by contributions from newly secured models.”
While demand for pool-cleaning products is expected to normalise, order ramp-ups from US-based customers and the coffee-brewer segment remain intact.
All in all, VSI’s management is maintaining its FY26 revenue target of RM4.2bil.
VSI also continues to attract interest from new multinational companies, leveraging Malaysia’s entrenched ecosystem.
Early-stage discussions are underway, with a medical industry collaboration emerging as the most tangible opportunity.
Printed circuit board assembly has already commenced for the client, the research house said.
Complementing this, a new customer in the pool-maintenance segment had been secured.
VSI is also deepening its integration with existing clients, notably by collaborating on the production of a battery pack, a common component across different models, for a customer.
Securing a RM300mil contract at a 3% net margin could boost FY26 earnings by approximately 7%, the research house further added.
