V.S. Industry Bhd (VSI) returned to profitability in the fourth quarter of FY2026, with core profit after tax and minority interests (PATAMI) of RM19.5 million, reversing a core loss of RM38.0 million in the preceding quarter as stronger sales improved operating leverage across its key markets.
For the full year, VSI recorded a core loss of RM21.5 million, compared with a core profit of RM38.8 million in FY2025. Nevertheless, the result came in ahead of research and consensus expectations for losses of RM49.4 million and RM32.0 million, respectively.
The earnings beat was attributed to stronger-than-expected sales to key brand owners. FY2026 core earnings excluded RM33.3 million in exceptional items, mainly impairment charges on property, plant and equipment and gains from asset disposals.
Quarter-on-quarter revenue rose 24.2%, driven by sales growth of 45.2% in Malaysia, 38.0% in Indonesia and 46.5% in the Philippines.
The recovery was attributed partly to restocking by brand owners after two weak quarters and higher contributions from “Customer X”, as production of 10 newly secured models progressively commenced between April and July.
On a year-on-year basis, group revenue increased 16.3%, supported by stronger sales across Malaysia and Singapore, Indonesia and the Philippines. Philippine sales surged 303.7% as two models reached full production compared with only one in the corresponding period last year.
For the full year, however, revenue fell 3.6% as weaker consumer demand reduced orders from brand owners, partly offset by maiden contributions from the Philippine operations.
FY27 Earnings Recovery Expected
The research house expects stronger sales in the coming quarter as customers build inventories ahead of the festive season, while VSI’s Philippine operation could turn profitable following the start of production for a third Customer X model in July.
Beyond the seasonal improvement, however, demand remains uncertain amid macroeconomic pressures and intensifying competition from Chinese brands.
Potential wage increases under Budget 2027 also represent a cost risk. Labour accounts for about 15% of VSI’s cost of goods sold, and the report said a possible RM200-RM300 increase in the minimum wage to RM1,900-RM2,000 could pressure margins if the company is unable to pass higher costs on to customers.
Following the stronger-than-expected results and improving Philippine operations, the research house raised its FY2027 and FY2028 earnings forecasts by 85% and 70%, respectively.
It also upgraded VSI to HOLD and raised its target price to 23 sen from 12 sen, based on 10 times FY2027 forecast earnings.
The research house said VSI should record a healthier earnings run rate in FY2027, supported by the expected turnaround in the Philippines and higher allocations from Customer X to its Malaysian operations, although uncertain post-festive demand and wage pressures could limit further re-rating potential.
