KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB Research) has upgraded its call on ViTrox Corporation Bhd's stock to "Hold" as it nears a 52-week low.
"Following our Sell recommendation, the share price has dropped close to our target price (TP), which remains the lowest among its peers."With the downside now under 10 per cent, we are upgrading ViTrox to a Hold rating, maintaining our target price of RM2.92," it said.
HLIB Research projects Vitrox' sales for the third quarter of 2024 (3Q24) to be stable at RM137 million but down 9 per cent year-on-year (YoY).
HLIB Research said this is based on the mid-points of its guidance and assuming flat sequential growth in electronic component sales (ECS).
"Since the start of 2024, we did not favour the semiconductor equipment (SE), semiconductor production equipment (SPE), and automated test equipment (ATE) subsector, which includes ViTrox, due to its consistent earnings disappointments over the past six quarters," it said.
The bank-backed research firm acknowledged ViTrox's technological leadership and asset-light business model but does not anticipate a short-term recovery in demand because of the persistent excess capacity in the supply chain.
Meanwhile, HLIB Research expects revenue from ViTrox's machine vision system solutions (MVSS) to be between RM9 million and RM12 million for 3Q24.
This represents a 4 per cent increase quarter-on-quarter (QoQ) but a 4 per cent decrease year-on-year (YoY)HLIB Research also highlighted the possibility of additional short orders by the end of the third quarter.
"Orders are now being placed with shortened lead times ranging 2-3 weeks vs 4-6 weeks previously."A major US-based IDM is actively negotiating for a potential volume order of test handlers worldwide over the next three years, with potential 50 machines to be shipped to China in 2024," it said.