KUALA LUMPUR: Hong Leong Investment Bank (HLIB) Research is optimistic about VS Industry Bhd's long-term outlook backed by the growth from its United States (US) customer and pool cleaner.
The research house said Malaysia revenue increased by 11 per cent quarter on quarter (QoQ) despite being the seasonally weaker quarter.
The firm gathered that this was partially due to the higher contribution from US customers as more models started to roll out.
"Additionally, the company recently secured a new factory to cater for the robust growth from this customer. Note that pool cleaners contribute the highest margin compared to others," it said.
On Customer Y, HLIB said the production of the first model had been delayed to August 2021.
The new 300,000 square feet facility at i-Park Senai Airport City faces some completion delays as full movement control order (FMCO) restrictions stalled construction works.
"The production of the first model for Customer Y will commence in Aug 2021 (from earlier guidance of June 2021) and is expected to contribute RM300 million to the financial year 2022 (FY22) top line.
"We reckon that this could be one of the biggest revenue contributors once the production starts to ramp-up fully," it said.
Meanwhile, the research house said the revenue contribution from Customer X is expected to sustain throughout the FY21 from the existing contracts.
"Despite the dwindling forecast on Victory, we reckon the increasing orders from others would offset this.
"We reaffirm our "buy" rating on VS Industry with a higher target price of RM1.77 from RM1.72 previously," it added.