A Lacklustre Start For The Year For Vitrox Corp

VITRO posted its third consecutive quarterly earnings miss in 1Q24 with yet another underwhelming earnings delivery on the back of missed turnover guidance said Maybank IB in its assessment over the results.

The house notes pending briefing updates it maintains FY24-26E earnings and TP of MYR7.90 and maintains a HOLD call on balanced risk reward proposition and a potential recovery in the second half of 2024.

Results miss expectations
Ex-one offs, VITRO’s 1Q24 core earnings of MYR17.7m came in below expectations at just 8%/9% of MaybankIB’s/street’s FY24E respectively. This was VITRO’s weakest quarterly CNP performance since 3Q19 and its 5th consecutive YoY quarterly earnings growth decline. ABI and MVS segment weakness likely persisted 1Q24 group turnover contracted 10% YoY/16% QoQ, primarily attributable to persistent weakness in its EMS-driven by ABI segment. Revenue undershot management’s quarterly guidance range of MYR127-141m by c.6-15%. This was likely compounded by tepid growth in the OSAT-led MVS segment (deriving >80% of its revenue from China) that saw continuous margin pressure from customer underinvestment and aggressive pricing strategies from its Chinese competitors. Unfavourable product mix and higher R&D expenses added to woes, yielding an EBIT margin of just 16.8% – its lowest since 1Q13.

Tough times, but 2H24 likely to fare better
Despite a broad-based recovery in semiconductor front-end utilisation materialising at wafer fab level, it is evident that stubborn time lag differentials still persist within the key sectors (automotive, industrial, telecommunications) that VITRO has significant exposure to. However, Maybank IB is more sanguine on its longer-term prospects, underpinned by its
dominant market share position in machine vision tech, diversified customer base and exposure to high-growth sectors such as EVs/5G/IR4.0.

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