PETALING JAYA: Vitrox Corp Bhd’s ability to recognise the growing potential of 3D vision systems and by opting to be one of the frontrunners in this field would help cement its reputation, UOB Kay Hian said in a report.

The research house said that together with the company’s core competencies in vision inspection technology, it expected Vitrox to drive “a strong net profit compounded annual growth rate of 31% from 2017-2020.”

Its advanced vision inspection systems and other products had gained a reputation over the years for their innovativeness and efficiency, the research house said.

It said it expected Vitrox to continue to enhance and widen the applications of its existing solutions, venture into uncharted areas and increase the number of sales channel partners in high growth markets.

Vitrox’s core competencies in vision inspection technology is expected to drive a favourable product mix, said UOB Kay Hian, adding that it liked the company’s well diversified revenue streams.

Vitrox also had the potential to be “a beneficiary of the US-China trade war and technology mega trends,” the brokerage said.

Initiating coverage on the stock, UOB Kay Hian gave the counter a “buy” rating with a target price of RM8.25, which is more than 20% upside from the present price levels.

“Being a market leader with more than 40% market share in 3D Advanced X-ray inspection and a top supplier of optical inspection and other vision products, Vitrox boasts a technology gap with second-tier players of at least two to three years,” it said.

UOB Kay Hian said the company’s growth would have been better if not for production floor space constraint.

“Following its recent move into a new plant that is three times larger than its old premises, the company aims to double its head count to 1,000 by 2020.

“Interestingly, we note that 2017 head count was double that of 2012 but sales and net profit grew much more strongly at 269% and 282%, respectively, suggesting productivity improvement,” it said.

Vitrox could also benefit from Beijing’s “Made in China 2025” roadmap as China may expedite investment in its semiconductor industry due to its tense relationship with the US, UOB Kay Hian said.

It noted that China is poised to be the largest semiconductor equipment market by 2019 with sales estimated to grow more than 40% per year in 2018-2019.

The research house also said that Vitrox would gain from technology mega trends such as the 5G network, autonomous driving, Internet of Things and artificial intelligence.