A solid end to VS Industry’s FY22
KUCHING: VS Industry Bhd’s (VS Industry) net profit fell to RM169.74 million for the financial year ended July 31, 2022 (FY22) from RM245.35 million in FY21 due to a one-off impairment on the investment in associate and impairment loss on plant and equipment.
Revenue decreased to RM3.91 billion in 2022 from RM4 billion a year ago.
In a filing with Bursa Malaysia, the integrated electronics manufacturing services (EMS) provider said the lower profit was also attributed to lower delivery of orders to key customers during the period due to labour shortage and protracted disruption in the global supply chain which affected the supply of components.
In the fourth quarter of 2022, VS Industry’s net profit contracted to RM34.57 million from RM41.49 million in the same quarter of 2021 due to a one-off impairment on the investment in associate and impairment loss on plant and equipment.
Revenue, however, rose 6.7 per cent to RM1 billion from RM941.09 million previously.
On prospects, VS Industry said the labour shortage issue is now resolved following the arrival of adequate numbers of foreign workers.
“Supply chain and logistics issues, while challenging, are manageable as we have also stocked up on certain raw materials with longer lead time. Order flow from customers remains reasonable at this juncture,” it added.
Zooming in on its geographical performance, Maybank Investment Bank Bhd (Maybank IB) saw that Malaysia segment’s FY22 profit before tax (PBT) contracted by 29 per cent year on year (y-o-y) due to the supply chain disruption and labour shortage issues.
This also led to unoptimised operations for the new facilities.
“Likewise, the Indonesia and China segment’s performances were lacklustre, as a result of lower sales orders and diseconomies of scale respectively,” it added.
“We believe VS Industry has finally cruised through the pandemic-led disruptions, and operations are slowly recovering with the arrival of foreign labour and normalising supply chain.”
While it remained cautious on headwinds such as inflationary pressure and consumer spending slowdown, which could drag VS Industry’s future earnings, Maybank IB believe these have been largely reflected in its conservative forecasts at this juncture.
It upgraded VS Industry to buy on better visibility in operational recovery.
Meanwhile, RHB Investment Bank Bhd (RHB IB) foresees VS Industry’s earnings recovery momentum gaining further pace going forward as production capacity will likely be boosted by the arrival of more foreign labour as well as improvement in parts and components supply.
“This should enable VS Industry to ramp up its new production lines and expand margins on higher operational efficiency – propelling FY23 earnings growth of 53 per cent.
“In addition, the progressive contribution from new production lines should offset the shortfall from the more cautious volume guidance by some of its key customers.
“Meanwhile, the positive findings from the social audit on labour practice should largely put an end to the ESG concern and remove the overhang on the stock, hence, the stock valuation should recover going forward.”