KUALA LUMPUR: Despite receiving approval for its manufacturing facilities to operate at up to 50% capacity, VS Industry Bhd is expected to face a steep decline in its earnings for the current financial year.
"Given the severity of the Covid-19 pandemic and the negative impact from the extended MCO, we cut our FY20E earnings forecasts by 22%, expecting a steep 58% decline in VS Industry’s FY20 core net profit," said Affin Hwang Capital research, which reiterated its sell call on the stock.
VS Industry is forecast to report its first loss-making quarter in eight years. In line with the outlook, Affin Hwang slashed its target price to 42 sen a share from 50 sen previously.
According to the research house, the electrical products manufacturer has been operating at sub-optimal levels for almost two months. It estimates the group's 3QFY20 pretax losses to widen to at least RM30mil, and balloon further if the movement control order is extended.
Amid the ongoing pandemic, Affin Hwang expects VS Industry's customers to revise orders and shift some of them to other existing contract manufacturers in China.
"We gather that production schedules for its Bissell models have faced delays too. Elsewhere, discussions with prospective customers have also been put on hold due to travel restrictions amid the Covid-19 pandemic," it said.
Over at its China operations, the facilities remains underutilised despite 70% of VS Industry's workers returning to work due to the absence of large sales orders, which was a problem even before the pandemic.
However, the group's Indonesia operations are expected to break even in FY20 on improved economies of scale.
https://www.thestar.com.my/business/business-news/2020/04/28/vs-industry-forecast-for-steep-earnings-slide
