KUALA LUMPUR: VS Industry Bhd is expected to benefit from robust job order prospects, supported by recovering demand and new product launches from key customers, according to analyst reports.
Hong Leong Investment Bank Bhd (HLIB Research) said that the lifting of restrictions on manufacturing floorcare products for one of VS Industry's customers, following a restructuring exercise, is expected to open new opportunities for the company to secure additional job orders.
"More importantly, this signifies a stronger relationship between the company and Customer X—evidenced by VS Industry securing two new models from Customer X, with commercial production slated to begin by February or March 2025.
"Elsewhere, in the Philippines, the progress of renovation works at its leased plant is on track, and production is scheduled to commence in March or April 2025. This should underpin VS Industry's near-term earnings growth, with MYR1.2 billion worth of orders in hand and the expectation of another contract win by the first quarter of 2025 (Q1 2025)," it said in a note.
VS Industry recorded revenue of RM1.1 billion, down three per cent year-on-year (YoY) for the first quarter of its 2025 financial year (Q1FY25). This translated into core earnings of RM32.8 million, down 22 per cent YoY.
HLIB Research said this missed its estimates at 12 per cent and consensus' at 13 per cent of the full-year forecast.
The firm maintained a 'Buy' on the stock with an unchanged target price of RM1.42.
RHB Investment Bank Bhd (RHB Research) stated that VS Industry's core net profit of RM31 million (-38% YoY) accounted for only 11-12 per cent of the firm's and consensus full-year forecasts due to sharp margin erosion following the drastic depreciation of the US dollar.
The firm cut its earnings forecast for the company by 14 per cent for financial year 2025 (FY25) but kept its FY26 and FY27 forecasts unchanged.
RHB Research also noted that VS Industry's job order prospects are positive.
"VS Industry's 1QFY25 results fell below expectations due to a drag stemming from sharp foreign exchange rate changes. Still, this does not alter our investment thesis that its market share gains and beefing up its internal supply chain will drive the company's medium-term growth prospects.
"Its outlook is exciting, with sizable new job orders to execute in 2025 and a favourable change in business dynamics at Customer X post the streamlining initiatives under the new management team," it added.
The firm maintained a 'Buy' on the stock with an unchanged target price of RM1.39.
Meanwhile, Public Investment Bank Bhd (PublicInvest Research) said VS Industry's results only made up 13 per cent of the firm's and 12.1 per cent of consensus' full-year estimates.
Nevertheless, the firm expects to see a positive recovery for the company going forward.
It also added that there has been recent speculation about one of its key customers wanting to dial back on its hair dryer-related operations in Malaysia.
"Those lines of products contributed about 24 per cent of VS Industry's contract manufacturing sales. Following our channel checks, we have been made to understand it is not true, as this key customer has been strengthening its collaborations with Malaysia's contract manufacturing players, focusing on ramping up production and expanding product offerings," it said.
PubicInvest Research kept its 'Buy' call on VS Industry with a lower target price of RM1.18 from RM1.40 previously.