PETALING JAYA: Earnings recovery at VS Industry Bhd
(VSI) may take longer than expected as renewed geopolitical tensions, weak consumer electronics demand and cautious customer spending continue to cloud the contract manufacturer’s outlook, according to Hong Leong Investment Bank (HLIB) Research.
It maintained its “sell” call on the stock with a target price of 12 sen, saying that the renewed escalation in the US-Iran conflict had added another layer of uncertainty to an already challenging operating environment for consumer-focused electronics manufacturing services players. Its shares traded at 24 sen at the time of writing.
“At current levels, investors are increasingly looking for clear evidence of a sustained recovery in orders, particularly as the stock trades below its net tangible assets of 53 sen per share.
“VSI’s turnaround remains dependent on a recovery in utilisation levels across its Malaysia and Philippines operations, with stronger order momentum needed to support a more meaningful improvement in earnings,” it said in a report.
However, it noted that the softer consumer electronics environment could continue to moderate the pace of recovery.
It pointed out that the broader operating environment remains challenging, with US tariffs already weighing on consumer sentiment while a more cautious interest rate outlook could further pressure discretionary spending.
Continued inflationary pressure and supply-chain uncertainties could also prompt major brand owners to remain cautious on inventory replenishment, potentially delaying a stronger recovery in orders for consumer electronics manufacturers.
On VSI specifically, HLIB Research said Customer X remains a key earnings swing factor for both its Malaysia and Philippines operations.
The research house said recent cost-reengineering initiatives by the customer had affected utilisation at VSI’s sub-assembly operations, including its liquid silicone rubber business.
“Our financial year 2026 (FY26) forecast implies another loss-making quarter of approximately RM9mil, against consensus expectations of RM13mil in net profit and management’s guidance for a potential turnaround,” it added.
“Meanwhile, our FY27 forecast remains 24% below consensus.”
