KUALA LUMPUR: The strengthening of the ringgit will have a short-term impact on VS Industry Bhd as three of its customers have their revenue denominated in US dollar.
Hong Leong Investment Bank Bhd (HLIB) said the impact is expected to hit the company's topline by eight to 10 per cent.
"This can only be adjusted for the currency impact (i.e. weaker US dollar) during the quotation of new models," it said in a note.
For the company's Customer X, where revenue is quoted in ringgit, demand recovery was recorded since early this year and continues to gain momentum.
As for its US-based customers as well as coffee brewer and pool cleaning customers, the demand is stable with new product models launched and several more in the pipeline.
"In terms of revenue breakdown for financial year 2024 (FY24), Customer X, US-based customers, coffee brewer, pool cleaning and Customer Y contributed 33 per cent, 20 per cent, 15 per cent, eight per cent and five per cent respectively.
"Eight per cent was from China and Indonesia while the remaining was from other customers in Malaysia," it said.
HLIB added that VS Industry is on track with its value enhancement projects, the first and second projects are up and running and gaining healthy traction.
"Its third (blistering) and fourth project (anodising) test runs went smoothly and are ready to go for mass production. HT Press production yield has been improving but has yet to reach ideal levels."
HLIB maintained a "Buy" call on the stock with an unchanged target price of RM1.42.
"We like VS Industry on the back of its leading EMS position with a diverse customer base and strategic capacity expansion which will sustain its revenue growth and profitability."