VS Industry Bhd’s (VSI) 1QFY24 results were less than forecasted by Maybank Investment Bank (Maybank IB), and it maintains its cautious view on VSI due to uncertainty about consumer electronic demand, that relies on macro developments.
“We see upside potential from new customer acquisitions and improved volume, and downside risks include slower-than-expected demand recovery for VSI assembled products and customers’ wallet share loss,” it said today (Dec 21).
In its research note, Maybank IB said the group’s 1QFY24 results were disappointing at 17% of ours and consensus full-year forecasts.
“Despite this, we maintain our forecasts, expecting improved customer orders with recovering end-consumer demand and increased contributions from the recent acquisition.
“Our new target price (TP) is 83 sen (15x FY24E PER; -0.5SD 5Y mean) versus previously RM1.05 (19x FY24E PER; -5Y mean), reflecting a discounted recovery path,” it said.
However, the research house also maintains its HOLD call as the share price has declined 22% since Sept 2023.
In 1QFY24, core net profit (CNP; ex one-offs) fell 37% year-on-year (YoY) to RM40.3 million with an 11% YoY revenue decline.
“Reduced sales orders from key customers contributed to a lower overall utilization rate. CNP dropped 25% quarter-on-quarter (QoQ) despite flat revenue.
“We believe this was due to a less favourable product mix with lower margins and decreased plant utilisation,” it said.
Maybank IB said geographically, 1QFY24 key market performance was subpar, with a 20% sales decline in Malaysia and a 30% drop in Indonesia.
“This impacted profit before tax (PBT) in Malaysia, down 16% to MYR65.5 million, and resulted in a small loss before tax (LBT) of RM1.5 million in Indonesia.
“Notably, the latter’s performance weakened QoQ, even compared to the festive holiday, which affected previous quarter.
“Concurrently, China’s PBT remained relatively stable, showing minimal change both QoQ and YoY, hovering around a RM2.8 million loss,” it added.
