Company Coverage
VS Industry (VSI MK): Gradual Recovery; Diversifying For Growth
BUY (Maintained)
Current price:
Target price:
Upside:
RM0.27
RM0.35
+29.6%
Analyst
Analyst
Highlights
- VS is reshaping its business mix beyond consumer electronics, while optimising its existing manufacturing footprint and pursuing higher-margin opportunities. We expect improving utilisation and stronger order flows to support a return to profitability in FY27, with diversification providing a longer-term earnings growth avenue.
- VS trades at just 8.8x FY28F PE (-1SD below historical mean) and 0.5x FY28F P/B (-1.5SD), well below the trough valuations seen during the MCO period (0.83-0.88x P/B), suggesting limited downside with asymmetrical upside potential.
- Maintain BUY with a target price of RM0.35. Key re-rating catalysts include further order normalisation, improving capacity utilisation, sustained earnings recovery, and potential new customer wins.
Analysis
- Diversification to underpin the next leg of recovery. VS Industry (VS) is entering a transition phase as management looks beyond consumer electronics (CE) to diversify its revenue base and better utilise its existing manufacturing footprint. This comes as the group ended FY26 as its first loss-making year since listing, despite 4QFY26 revenue recovering to around RM1b (+24% qoq, +16% yoy) and operations returning to profitability before a RM39.7m impairment. Management remains cautious on the broader EMS recovery and is prioritising new customer wins and alternative end-markets to improve its utilisation and revenue mix. We understand that discussions with prospective new customers are still at an early stage. Given the time required for customer qualification, production setup and volume ramp-up, we expect meaningful contributions to become visible from FY28 onwards.
- Near-term seasonal demand points to sequential improvement. We expect VS to deliver a sequentially stronger 1QFY27, supported by stronger orders and seasonal loading ahead of the year-end festive peiord. Key customers are also scheduled to launch new models in FY27, which should provide further production loading. That said, we expect this to support the initial earnings recovery, although a more sustained improvement will depend on order visibility and operating efficiency.
Highlights
- VS is reshaping its business mix beyond consumer electronics, while optimising its existing manufacturing footprint and pursuing higher-margin opportunities. We expect improving utilisation and stronger order flows to support a return to profitability in FY27, with diversification providing a longer-term earnings growth avenue.
- VS trades at just 8.8x FY28F PE (-1SD below historical mean) and 0.5x FY28F P/B (-1.5SD), well below the trough valuations seen during the MCO period (0.83-0.88x P/B), suggesting limited downside with asymmetrical upside potential.
- Maintain BUY with a target price of RM0.35. Key re-rating catalysts include further order normalisation, improving capacity utilisation, sustained earnings recovery, and potential new customer wins.
Analysis
- Diversification to underpin the next leg of recovery. VS Industry (VS) is entering a transition phase as management looks beyond consumer electronics (CE) to diversify its revenue base and better utilise its existing manufacturing footprint. This comes as the group ended FY26 as its first loss-making year since listing, despite 4QFY26 revenue recovering to around RM1b (+24% qoq, +16% yoy) and operations returning to profitability before a RM39.7m impairment. Management remains cautious on the broader EMS recovery and is prioritising new customer wins and alternative end-markets to improve its utilisation and revenue mix. We understand that discussions with prospective new customers are still at an early stage. Given the time required for customer qualification, production setup and volume ramp-up, we expect meaningful contributions to become visible from FY28 onwards.
- Near-term seasonal demand points to sequential improvement. We expect VS to deliver a sequentially stronger 1QFY27, supported by stronger orders and seasonal loading ahead of the year-end festive peiord. Key customers are also scheduled to launch new models in FY27, which should provide further production loading. That said, we expect this to support the initial earnings recovery, although a more sustained improvement will depend on order visibility and operating efficiency.
BUY (Maintained)
Current price:
Target price:
Upside:
RM0.27
RM0.35
+29.6%
Analyst
Analyst
IMPORTANT NOTICE - DISCLOSURES AND DISCLAIMERS
This report is provided subject to, and must be read together with, the full Disclosures / Disclaimers available at this link, which are incorporated by reference into this report. In particular, this report is intended for general circulation and informational purposes only and does not constitute personal investment advice or a recommendation to buy or sell any investment product or security. You should independently evaluate the information and, where necessary, seek advice from a qualified financial adviser regarding the suitability of any investment. Analyst certifications required under applicable regulations, including SEC Regulation AC (where relevant), are included in this report. By accessing, receiving or using this report, you acknowledge that you have read, understood and agreed to be bound by the Disclosures / Disclaimers, as may be amended, supplemented or updated from time to time.
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