VS INDUSTRY BERHAD - Another Robust Quarter

Date: 16/06/2021

Source  :  PUBLIC BANK
Stock  :  VS       Price Target  :  1.56      |      Price Call  :  BUY
        Last Price  :  1.64      |      Upside/Downside  :  -0.08 (4.88%)

VS Industry (VSI) reported another strong sequential performance, with a 3QFY21 net profit of RM73.4m (>100% YoY, +15.0% QoQ) recorded. The Group’s Malaysian-based operations continued to be a key driver as an all-time high revenue of RM939.1m (+160.1% YoY, +11.0% QoQ) was seen, underpinned by robust global demand seen by its key customers. Cumulative 9MFY21 net profit of RM203.9m (+230.2% YoY) is ahead of our and consensus estimates at 90% and 85% of full-year numbers respectively. We leave estimates unchanged however on expectation of some impact from the current Movement Control Order, though full year numbers are still likely to exceed expectations regardless. Further upside is likely to come from earlier-than-expected line commissioning for its new customers. Our target price is raised to RM1.56 (RM1.52 previously) on a 20x multiple to a rolled-forward CY22 EPS. Our Outperform call is affirmed. A third interim dividend of 0.8sen was declared.

  • 3QFY21 revenue of RM1.07bn (+112.6% YoY, +7.6% QoQ) continues to reflect the strong sales orders from existing key customers, particularly ones secured by the Malaysian operations in the last two years. Cumulative 9MFY21 revenue of RM2.66bn for Malaysia is 19.0% higher YoY, though it must be noted 3QFY20 (February – April) operations were marred by the 1- month complete lockdown in March/April last year. The Group’s Indonesian operations, albeit on a notably smaller scale, saw cumulative 9MFY21 revenue increase +26.4% YoY to RM268.7m as it recorded higher sales orders from a key customer in consumer electronics which experienced brisk demand following increase in work from home arrangements worldwide. Activity in China remained lackluster.
  • 3QFY21 net profit of RM73.4m (+>100.0% YoY, +15.0% QoQ) benefitted from a surge in sales in Malaysia, in addition to higher profit margins arising from a more favorable product mix. Incidentally, the Malaysian operations reported a record 3Q and 9M pretax profit of RM99.7m and RM271.2m respectively. Operating losses continued to narrow in China meanwhile, with lower expenses incurred following a series of streamlining initiatives.
  • Outlook. Orders from key customers remain healthy and robust. The Group’s new 413,682-square feet facility in i-Park @ Senai Airport City is on track for completion in the next few months, catering for several new product models which are projected to commence production progressively over the coming quarters. With Malaysia currently in another movement lockdown, albeit not as draconian as last year, management is currently optimizing its production output while complying with the standard operating procedures stipulated by the authorities

Source: PublicInvest Research - 16 Jun 2021

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