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俄罗斯银行账号(accbuy.vip):VS Industry: Back to glory days

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,VS Industry plant in Senai

IN the past four months, shares of VS Industry Bhd had gone up by almost 56%, outperforming other “big boys” in the electronics manufacturing services (EMS) segment.

For comparison, ATA IMS Bhd rose by just 9.7% during the period, while SKP Resources Bhd and PIE Industrial Bhd were up by 17% and 25.4% respectively.

Despite the ongoing global chip shortage and production challenges, business has been robust for this beneficiary of the US-China trade diversion.

VS Industry has been enjoying stronger orders from its key clients, and the group has said several new product models are coming into production over the coming quarters.

The group, which is Asean’s top five EMS provider, has seen an improved bottom line for all three operating markets in the financial year of 2021 (FY21) ended July 31. The markets are Malaysia, Indonesia and China.

VS Industry recently reported a record net profit of RM245.34mil for FY21, which has more than doubled year-on-year (y-o-y). Revenue also increased by 23.4% y-o-y to RM4bil.

The Retirement Fund Inc or Kwap is the single largest shareholder of VS Industry, with a 11.2% stake.

Moving forward, the integrated EMS player should be able to continue its earnings growth momentum, riding on the ramp-up in production for its newer customers and a better product mix.

The two US-based customers secured in FY19 and FY20 could likely be driving the growth for the current financial year of 2022.

CGS-CIMB Research points out that the production for VS Industry’s newest US-based customer has commenced in August 2021.

“We expect VS Industry to still achieve a commendable revenue growth rate of 21.6% in FY22,” according to the brokerage.

“We estimate that sales to newer customers will garner better gross margins, leading to a better overall sales mix for the group in FY22,” according to the brokerage.

Despite its robust business and a diversified clientele, a key issue with VS Industry is its low net profit margins, which have been at low or mid-single digits.

In FY21, the net profit margin was 6.1%. While this is an improvement from the pre-pandemic 2019 level of 4.2%, it would not hurt to achieve a further increase.

Nevertheless, analysts think the margins will continue improving, especially with the sales to newer customers and a better overall sales mix.

Thanks to the US-China trade diversion, VS Industry has secured five new clients since 2019.

UOB Kay Hian Malaysia Research says VS Industry is still being approached by new multinational corporation customers, with discussions of prospective contracts at the early stages of evaluation.

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