CIMB Securities maintained its HOLD call on VS Industry Bhd (VSI) with an unchanged target price of 26 sen, saying a seasonal improvement in demand should support near-term earnings but weak global consumer spending continues to cloud the sustainability of orders.
Following VSI’s post-results briefing, CIMB said the electronics manufacturing services provider should see stronger revenue in the first quarter of FY7/27, supported by the year-end shopping season.
However, the research house expects demand to moderate beyond the quarter as persistent inflation continues to weigh on consumer spending and confidence.
VSI’s fourth-quarter FY7/26 results came in below management’s expectations due mainly to lower order volumes from a key customer, which CIMB estimated contributed 40% to 45% of group revenue for the financial year.
The weaker contribution was partly offset by resilient performance from VSI’s coffee brewer business and improving operating efficiency in the Philippines.
CIMB said the coffee brewer segment remained VSI’s most consistent non-key-customer business, contributing about 17% of FY7/26 group revenue and generating the highest margins among its businesses.
The research house expects VSI’s Philippines operations to continue improving, helped by the production ramp-up of a third product model, a motorhead, from October 2026.
The new programme is expected to generate RM80 million to RM100 million in annual revenue, equivalent to around 2% to 3% of CIMB’s CY2027 revenue forecast for the group.
Loss before tax at the Philippines operation narrowed to RM3 million in 4QFY7/26 from RM7 million in the preceding quarter, while management indicated the operation had returned to profitability during the final month of the quarter.
CIMB expects the division to move towards sustained profitability during FY7/27 as production volumes increase.
The research house made no changes to its earnings forecasts and maintained its 26 sen target price, based on 11 times CY2027 forecast earnings.
At a share price of 28 sen, the target implies downside of about 7%.
CIMB said while a near-term earnings recovery is possible, it remains cautious on the medium-term outlook given uncertain consumer demand, inflationary pressures and the risk of higher operating costs.
