KUALA LUMPUR (Dec 5): Analysts have turned more positive on VS Industry Bhd (KL:VS) driven mainly by improving order visibility and narrowing of losses at its Philippine unit.
In separate notes on Friday, Public Investment Bank and CIMB Securities upgraded the stock to 'buy' from a 'hold' call, while RHB maintained its 'buy' call.
The shift in tone comes even as core earnings for the first quarter ended Oct 31, 2025 (1QFY2026) came in mixed with only PublicInvest deeming the results in line, while RHB and CIMB said the quarterly results fell short of expectations.
Group revenue slipped 2.9% year-on-year (y-o-y) to RM1.08 billion, dragged by a 30.7% decline in Indonesian sales. However, Malaysia — the group’s largest segment — grew 25% y-o-y to RM1 billion as new models entered mass production.
On a quarter-on-quarter basis, revenue rebounded sharply by 25.6%, following earlier order deferments tied to the US tariff decision.
Meanwhile, the Philippine division showed the strongest improvement during the quarter, with losses narrowing significantly as haircare production ramped up and floorcare manufacturing is set to begin in December.
CIMB cited the company’s anticipation for the Philippine unit to break even by end-FY2026 and potentially contribute RM900 million to RM1 billion in annual revenue once fully scaled.
Consequently, CIMB raised its FY2026-FY2028 core net profit forecasts by 19%, 8% and 8% respectively.
The upward revision reflects expectations of stronger order volumes from “Customer X”, supported by a new model launch, as well as a production ramp-up at the group’s Philippine operations, it added.
VS also benefitted from the reversal of earlier impairments and higher utilisation in Malaysia, helping it swing back into profitability from the previous quarter’s loss. The group declared a first interim dividend of 0.4 sen.
Further, PublicInvest said that now that the reciprocal tariff rate for Malaysia has been finalised at 19%, it expects order flows to stabilise over the coming quarters, reducing the volatility seen in previous periods.
It said the recent interest rate cut in the US also offers some relief and may support a gradual improvement in demand.
"However, given VS’ high customer concentration in the US, we believe earnings recovery may take time, especially against the backdrop of a softer US economy," added the firm.
PublicInvest said the share-price pullback has materially improved the stock’s risk-reward profile.
Separately, RHB anticipates a stronger 2HFY2026, underpinned by new customer wins and additional production lines after a weaker seasonal 2QFY2026.
Management noted that the Philippine plant is on track meeting its customer’s requirements in terms of production yield and efficiency.
In Malaysia, more new production lines are planned to commence in the fourth quarter of FY2026, and the newly secured pool cleaning customer — expected to contribute RM300 million annually — will begin generating revenue from March 2026 onwards.
"Hence, we look forward to a robust earnings jump in 2HFY2026," it added.
As of Friday, the counter has five 'buy' and one 'hold' calls from analysts, with target prices ranging from 49 sen to 70 sen.
VS’ shares were 3.26% higher at 47.5 sen at the time of writing on Friday, valuing the group at RM1.83 billion.