RHB Research has maintained a “Buy” recommendation for VS Industry Bhd with a new TP RM1.85 from RM2.03.
It said that VS Industry’s 1QFY22 (Jul) results were disappointing due to sharp but temporary margin compression. Most of the drag factors should dissipate going forward hence we foresee a quick earnings rebound.
“Longer-term earnings growth prospects are exciting, underpinned by strong orders from customers, the ramp-up of new production lines, and capacity expansion. The sentiment dampener in the foreign labour concern should blow over with the management taking a proactive stance to address the issue, “RHB said.
RHB said that it is not overly perturbed by the soft 1QFY22 earnings as most of the drag factors are temporary. “Essentially, the orders from its key customers have remained robust and the ramp-up of new production lines should progress more swimmingly going forward when the constraints on labour and components are alleviated,” it said.
Meanwhile, it said that the continuous capacity expansion has signified management’s optimism on the future contract flows with the company actively engaging with more prospective customers.
On the other hand, it said that it understands that VSI has identified areas of improvement and the relevant action plans to further upgrade its labour standards and this should lift sentiment and allay the concern on the migrant worker’s issue
