KUALA LUMPUR: VS Industry Bhd is expected to suffer from an overall earnings deterioration in financial year 2024 (FY24), according to Affin Hwang Capital.
VS Industry's core net profit for its second quarter was one of its weakest earnings recorded at RM10 million, a decline of 69 per cent year-on-year (YoY) due to lower orders from its key customers, which in turn affected the overall utilisation rate of production capacity.
Cumulatively, VS Industry's core net profit came in at RM59 million for its first half of the year, representing a 34 per cent decline YoY, said Affin Hwang.
"While orders from its key customers have been slow, the group indicates that there may be some reprieve going forward, underpinned by normalisation of inventory levels and improving consumer sentiment, and coupled with new models from certain customers.
"Nonetheless, although recovery on a half-on-half basis (2HFY24 vs 1HFY24) could be likely, we are still sceptical about a YoY improvement in earnings, and believe that FY24 will still suffer from an overall earnings deterioration.
"In order to counteract this, the group has been enhancing its in-house capabilities, and is working towards broadening its clientele base," Affin Hwang said in a report today.
Affin Hwang added that VS Industry's results were broadly within expectations, coming in at 36 per cent and 33 per cent of the firm and consensus' full-year earnings forecasts.
It reiterated a "Sell" call on the company, with an unchanged target price of 71 sen.
"Unless and until the group is able to resolve the uncertainty over its orders, we do not see any immediate re-rating catalyst for the time being," Affin Hwang said.
