• 6MFY17 results within expectations

• 2QFY17 profit climbed 6% qoq as sales jumped 12.3%

• Boosted by overseas units

• Non rated with FV of RM1.81

6MFY17 results within expectations as earnings made up 46% of our full year expectations. V.S. Industry’s (VSI) profit for the period came in at RM69.01m, which is -21.3% lower yoy, mainly due to the high initial start-up costs for its new box-build lines. We expect 2HFY17 earnings to come in much stronger as the company prepares to get more orders. VSI has announced an interim dividend of 1.2 sen, which brings the YTD dividend to 2.4 sen.

2QFY17 net profit climbed 6% qoq as sales jumped 12.3%. The higher qoq and yoy sales are starting to show in the current quarter and we foresee that the momentum will continue. As a result, the high start-up cost should ease in the third and fourth quarter as the production lines run more efficiently.

Overseas units boost. China’s PBT more than tripled from RM3.84m to RM13.9m in 1HFY17. Indonesia also showed a strong PBT growth of 39% from RM3.8m to RM5.27m. Its 1HFY17 PBT contribution from overseas has grown significantly to 17.4% from 6.8% in 1HFY16. We believe its overseas operations, particularly China, will perform favourably as they secure more orders and improve their operational efficiencies.

Non rated with higher FV of RM1.81 pegged at 11x FY18F EPS. The higher Fair Value is due to roll over of unchanged 11x PE to FY18 EPS.

Source: MIDF Research - 29 Mar 2017