Rebound likely for VS Industry post-tariff clarity

PETALING JAYA: Sentiment is expected to remain weak for VS Industry Bhd in the near to medium term, as key customers await a final decision on US tariff rates for consumer electronic imports.

CGS International Research (CGSI Research) said the group posted a “surprise” core net loss of RM30.1mil in the fourth quarter of financial year ended July 2025 (4Q25) versus core net profits of RM23.7mil and RM83.3mil in 3Q25 and 4Q24, respectively.

“The shortfall was attributable to a plethora of factors, primarily order pullbacks over tariff-related uncertainties, cost-down pressures from customers and startup losses of RM20.5mil in the Philippines from the gestation of its plant ramp-up,” CGSI Research said.

The research house has a “hold” call on VS Industry with a lower target price of 60 sen, implying a financial year 2027 (FY27) price-to-earnings (PE) ratio of 11.9 times, a discount to its eight-year mean of 16.5 times.

“Whilst awaiting further details at its analyst briefing today, we preemptively temper growth expectations and revise our FY26 to FY27 earnings per share estimates lower by 21% to 25%,” it said.

Hong Leong Investment Bank Research (HLIB Research) said the consumer electrical and electronics demand outlook remains clouded by weak consumer sentiment and potential inflationary pressures from reciprocal tariffs.

“Adding to this, uncertainties surrounding the US Supreme Court ruling on president Trump’s tariffs could prompt brand owners to scale down orders until the Nov 5 hearings.

“Operationally, we remain cautious on ongoing cost-down requests from brand owners, which may temporarily squeeze electronics manufacturing services (EMS) margins given the limited ability to pass on costs,” the research house said.

HLIB Research also has a “hold” call on VS Industry with a lower target price of 54 sen. It said post-earnings revision, it recalibrates VS Industry’s valuation by assigning a lower PE multiple of 15 times (from 18 times) to reflect subdued consumer sentiment and the challenging outlook for the consumer EMS sector.

Meanwhile, CIMB Research said it cut FY26 to FY27 earnings per share by 42% to 43% to reflect demand uncertainty and tariff risks, though it noted improving 1Q26 orders and new model ramps.

Separately, Maybank Investment Bank Research (Maybank IB) maintained its “buy” call on VS Industry, albeit with a lower target price of 71 sen.

Maybank IB is of the view that with tariff uncertainties now largely resolved, it believes order flows to VS Industry could improve.

RHB Research which also maintained its “buy” call on VS Industry with a target price of 78 sen, said it believes a swift earnings rebound is on the horizon, in view of an immediate volume recovery post-tariff clarity and new product launches, despite the disappointing FY25 results.