Strong order flows, new models to benefit VS Industry

PETALING JAYA: VS Industry Bhd, the country’s second-largest listed electronics manufacturing services firm, remains a “relative laggard” even as the stock rebounded by 29% from its April 4 low.

Pointing out that “value is still on the table”, UOB Kay Hian (UOBKH) Research said the VS Industry stock is trading below its seven-year forward mean.

The research house also expects VS Industry to see a strong sequential recovery in the fourth quarter (4Q) of financial year 2025 (FY25).

This would be followed by a “transformative” FY26, underpinned by a more favourable operating landscape.

“Additional impetus could come from its potential foray into new industries alongside onshoring opportunities,” it said in a note.

According to UOBKH Research, the first nine months of FY25 were riddled with challenges including foreign-exchange headwinds in 1Q, inventory adjustments from a key US customer in 2Q and operational hiccups tied to the Liberation Day saga in 3Q.

While end-customers stay cautious amid pricing uncertainty with lean just-in-time inventory strategies pending the July 9 trade deadline, UOBKH Research gathered that the current loadings indicate underlying demand resilience, setting the stage for a sequentially stronger earnings performance.

Notably, order flow from its key customer remains robust, supported by the rollout of two new models that entered production in 1Q of 2025.

In parallel, VS Industry has been awarded orders for four additional models locally – with one already in production as of May.

“The remaining three are on standby, pending further instructions, which could position the group for an uplift in capacity utilisation and stronger revenue traction moving into FY26 (incremental revenue potential of RM800mil).

“VS Industry is well-positioned for a strong FY26, supported by improved visibility from its Malaysian operations.

“Complementing this, the Philippines operations are gaining traction – with mass production of a beauty care product already underway, expected to contribute RM40mil in FY25 and significantly ramp up in FY26.”

Strategically, the Philippines facility acts as a tariff hedge and benefits from a five-year tax exemption.

At full scale, this entity could generate up to RM1.7bil in annual sales.

To unlock further upside, it said VS Industry is in discussions for two additional product lines to maximise revenue potential.

It has a “buy” call on VS Industry with a higher target price of RM1 per share.