VS Industry poised for re-rating as earnings recover, orders improve

KUALA LUMPUR: VS Industry Bhd could see a re-rating as improving orders, higher plant utilisation and customer diversification support an earnings recovery, said UOB Kay Hian Research.

The firm said the electronics manufacturing services provider's established manufacturing capabilities, technical expertise and spare capacity positioned it to secure new programmes as customers diversify their manufacturing operations.

"Successful conversion of these opportunities could provide an additional catalyst for earnings growth and a potential re-rating," analysts Desmond Chong and Lee Cai Yu said in a note.

VS Industry returned to the black in the fourth quarter ended July 31, 2026 (Q4 FY26), posting a core net profit of RM21.4 million against a core net loss of RM32.9 million in the preceding quarter and RM18.4 million a year earlier.

The analysts said the result was broadly in line with their expectations but ahead of the consensus forecast of a RM32 million core net loss for FY26.

For FY26, revenue fell four per cent year-on-year to RM3.7 billion, mainly due to softer orders from key customers amid subdued consumer sentiment.

Excluding RM32.9 million in exceptional items, VS Industry recorded a core net loss of RM16.6 million for the year, although its fourth-quarter return to profitability marked an improvement from losses in the first nine months.

The Q4 recovery was supported by a 24 per cent quarter-on-quarter increase in revenue as orders improved at its Malaysian and Philippine operations.

The analysts said the return to profitability was partly driven by pre-festive inventory build-up and replenishment following weak orders in the preceding quarter.

VS Industry's Indonesian operations remained profitable, with FY26 pre-tax profit more than doubling to RM3.1 million from RM1.1 million, as higher orders from existing customers offset the exit of a key printed circuit board assembly customer.

Meanwhile, quarterly pre-tax losses at its Philippine operations narrowed to RM3 million from RM7 million as utilisation improved with additional models entering production.

The Philippine plant reached breakeven in August.

"The commencement of the third production line alongside a programme reportedly transferred from a competitor should provide further utilisation upside in FY27," the analysts said.

Looking ahead, VS Industry's management expects a steady recovery in customer orders ahead of the year-end festive season, with momentum likely to continue into Q1 FY27.

UOB said new model launches by key customers in FY27 should support higher plant utilisation, prompting it to raise its FY27 and FY28 earnings forecasts by four to five per cent.

The research firm maintained its "Buy" call on VS Industry and raised its target price to 35 sen from 34 sen. The stock last closed at 23.5 sen.

It said the stock's valuation remained compelling, with its current price-to-book ratio below the 0.83 to 0.88 times range seen during the Covid-19 period.

This suggested limited downside relative to the potential upside if the earnings recovery and diversification efforts translated into sustained growth.