(BUY/Target: RM1.60)

VSI’s 2QFY16 core net profit was in line with our expectation. Although sales rose 7.7% yoy, core net profit grew by a higher 40.9% yoy, driven by margin expansion from a favourable product mix and operational efficiency. Given VSI’s recent subscription of a 12.1% stake in SML, its emergence as the key manufacturer for SML’s automobile products is a potential catalyst to the stock in the longer term. Maintain BUY and target price of RM1.60, based on 12x 2017F PE.

Source: UOB Kay Hian Research - 29 Mar 2016