KUALA LUMPUR (Sept 28): VS Industry Bhd (VSI) has cruised through the pandemic-led disruptions such as labour and raw material shortages, according to Maybank Investment Bank, which has upgraded the stock to a "buy" call and raised the target price to RM1.15 from RM1.07.

Its analyst Loh Yan Jin wrote in the result review that the company's operations are slowly recovering with the arrival of foreign labour and the normalising of the supply chain. Her buy call hinges on the view of better visibility in operational recovery.

"We believe VSI has finally cruised through the pandemic-led disruptions (i.e. labour and raw material shortages), and
while we remain cautious on headwinds such as inflationary pressure and consumer spending slowdown that could drag VSI’s future earnings, we believe these have been largely reflected in our conservative forecasts at this juncture," Loh commented.

The analyst expects VSI's annual core net profit to expand to RM277 million in the financial year ending July 31, 2023 (FY23), up 28% from RM215 million in FY22. Forecast annual revenue is RM4.23 billion in FY23 compared with RM3.91 billion.

Commenting on the earnings performance in FY22, Loh said VSI's core net profit of RM215 million after excluding negative one-off amounted to RM46 million consisting of some loss from disposal and impairments.

“VSI’s 4QFY22 also improved by 55% on a quarter-on-quarter basis due to labour arrival,” he added.

Loh said that earnings fell due to lower order deliveries following labour and component shortages, and higher depreciation costs. However, its 4QFY22 CNP of RM82 million came in higher and it is largely attributed to the ramping of production following arrival of labour since the end of May.

At market close on Wednesday, VS Industry’s share price was up 2.67%  or 2.5 sen to 96 sen, valuing the group at RM3.67 billion.