VSI to gain from new product offering from FY25
PETALING JAYA: Analysts anticipate VS Industry Bhd ’s (VSI) move to increase its product offering and value chain to start paying dividends in the next financial year, despite a weak performance for its first half of financial year 2024 (1H24).

The integrated electronics manufacturing services (EMS) provider posted a 47% year-on-year (y-o-y) fall in its second quarter (2Q24) net profit to RM16mil on order cuts from Customer X and sustained weakness from Customer Y.

This resulted in its 1H24 earnings falling 27% y-o-y to RM65mil, which equalled some 39% of consensus and CGS International (CGSI) Research’s forecast.

Nevertheless, analysts came out optimistic about VSI’s future following a briefing with management who informed that the group has secured some RM110mil worth of new orders, including for its new liquid silicone rubber (LSR) venture.

“We believe the new model introductions by Customer X in the coming months could translate to a higher utilisation rate for VSI.

“It managed to obtain new initial qualifications to supply certain components on a subcontract level for Customer X’s several household products through its new added capabilities, namely LSR and dipping process.”

The group is also adding blistering and aluminium tube capabilities to serve the broader supply chain for other household products, CGSI Research stated in a report.

The research house, however, cautioned that VSI’s new business avenues may only contribute meaningfully to the group’s earnings per share (EPS) later in financial year 2025 (FY25) as it moves into high-volume manufacturing.

Meanwhile, CIMB Research is optimistic that VSI’s new ventures will garner higher margins relative to box build products, indicating strong potential for upside to the group’s FY25 and FY26 earnings.

“We have not accounted for these new processes in our margin forecast. VSI is confident of securing a new major customer by end-2024, for which it is currently at late stage negotiations.

“Assuming similar net margins of 5%, we estimate every new customer sales flow of RM200mil won would lead to a 4.3% and 3.6% increase to our FY25 and FY26 core EPS assumptions, respectively” it stated in a report.

CIMB Research said another plus for VSI is the improving prospects for its 62%-owned Vietnamese operations under VS Industry Vietnam, which has turned profitable in the recent year and serves more multinational corporations in the United States and Europe.

It has increased its FY25 and FY26 core EPS for VSI by 6.4% and 4.5%, respectively, on expectations of higher contribution from new ventures and stronger margins from higher utilisation rates.
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Analysts anticipate VS Industry Bhd’s (VSI) move to increase its product offering and value chain to start paying dividends in the next financial year, despite a weak performance for its first half of financial year 2024 (1H24).