KUALA LUMPUR (March 24): VS Industry Bhd’s (KL:VS) earnings are likely to decline this year amid subdued consumer electronics demand, which is expected to persist, and delays in earnings contributions from its Philippines venture, analysts flagged.

Core net profit for the first six months accounted for only 19% of the full-year estimates by analysts, prompting significant cuts in earnings forecasts.

"We expect a weaker performance for FY2025 (the financial year ending July 31, 2025) due to the ongoing inventory adjustment by its US-based customer until 4QFY2025, while the new Philippine operation remains in its gestation period before ramping up production to an optimal level," Public Investment Bank said in a note.

The research house slashed its FY2025-26 earnings forecasts by 10%-47%, and downgraded its call on the stock to 'neutral', with a lower target price of 77 sen.

Public Investment Bank also noted that the electronics manufacturing services provider’s 60%-owned, loss-making Johor-based HT Press Production had been scaled down, with minimal revenue from anodising. Additionally, its new plant will lose rental-free status after this month.

Investors have remained cautious, with VS Industry’s stock trading unchanged at 84 sen at the time of writing on Monday. The counter has fallen more than 25% since the start of 2025.

At least three research houses have downgraded the stock, with the average target price standing at RM1.14, according to Bloomberg.

"We expect this cautious trend to persist in the coming months," Hong Leong Investment Bank stated, attributing it to prevailing market uncertainties, potential supply chain disruptions, and subdued consumer sentiment.

It added that the group’s new venture, VS Industry Philippines Inc, is preparing for a production trial run, with mass production expected to commence in the next two months for two confirmed product models.

However, the firm maintained its forecasts, and kept its 'buy' call under review, pending a management briefing scheduled for Wednesday.

CIMB Securities also flagged downside risks, including weak global consumer electronics demand, unfavorable foreign exchange movements due to a stronger ringgit against the US dollar, and a prolonged gestation period for its new Philippine venture.

It also slashed its FY2025-27 earnings estimates by 23% to 33%, and downgraded the stock to 'hold', with a lower target price of 90 sen.

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