PETALING JAYA: VS Industry Bhd
(VSI) is expected to see stronger sales from key customers on the back of pre-festive inventory build-up, although clear evidence of a sustained recovery in orders will matter more than the seasonal pickup in the coming quarter.
Hong Leong Investment Bank (HLIB) Research said VSI reported a core profit after tax (PAT) and minority interest of RM19.5mil for the fourth quarter of the financial year 2026 (4Q26) (versus 3Q26’s core loss after tax and minority interest (Latami) of RM38mil), bringing financial year 2026 (FY26) core Latami to RM21.5mil (versus FY25 core PAT of RM38.8mil).
“Results beat both our and the consensus full-year net loss forecasts of RM49.4mil and RM32mil, respectively.
“The beat was driven by stronger-than-expected sales to key brand owners, which improved operating leverage across its operations.
“FY26 core Latami excludes RM33.3mil in exceptional items, mainly comprising property, plant, and equipment (PPE) impairment charges and gains on PPE disposals,” the research house said.
HLIB Research said the group’s Philippines operations could also turn profitable as the third model for Customer X enters production in July.
“However, demand beyond the festive period remains uncertain amid macro uncertainties and intensifying competition from Chinese brands.
“We believe clear evidence of sustained order recovery will matter more to investors than the coming quarter’s seasonal pickup.”
HLIB Research said meanwhile, Budget 2027 poses a potential cost risk through a possible RM200 to RM300 minimum wage increase from RM1,900 to RM2,000.
The research house noted labour accounts for about 15% of cost of goods sold, and weak sales at brand owners leave limited room to pass on higher wage costs.
“We, therefore, expect the group to partially or fully absorb any increase, weighing on margins and limiting the earnings recovery even if sales improve.”
HLIB Research raised its FY27 and FY28 earnings forecasts by 85% and 70%, respectively, reflecting stronger Philippines sales and better group margins as the Philippines operation ceases to be a drag on earnings.
The research house upgraded its call to a “hold” with a higher target price of 23 sen (from 12 sen), based on 10 times FY27 earnings per share.
“Overall, we maintain a tepid outlook on the consumer electronics manufacturing services segment, with weakening consumer sentiment remaining the key risk.
“For VSI, we expect a much healthier earnings run rate in FY27 following the steep losses recorded in 2Q26 to 3Q26, supported by the anticipated turnaround in the Philippines and higher allocations from Customer X to VSI’s Malaysia operations,” HLIB Research said, adding that uncertain demand beyond the seasonal peak and potential wage pressure leave limited scope for a re-rating.
Meanwhile, CIMB Research said it raised its FY27 and FY28 earnings estimates by 23% and 14%, respectively, as it expects the recent harmonisation of tariff measures between the United States and China to improve near-term order visibility from key customers.
“That said, persistent inflationary pressures could limit further upside, as the ongoing US-Iran conflict continues to keep commodity prices elevated.
“We estimate that the Philippines division will achieve breakeven in FY27, supported by the successful acquisition of the moulds required for household product assembly work for key customers, coupled with the gradual production ramp-up of its third product model.”
CIMB Research maintained a “hold” call with a higher target price of 26 sen (versus 21 sen previously), based on an unchanged 2027 price-to-earnings multiple of 11 times.
