FREE MALAYSIA TODAY. 27TH OCTOBER: AmInvestment Bank Research has upgraded its call on ViTrox Corp Bhd (ViTrox) from “hold” to “buy” despite its net profit tumbling 34.6% to RM33.2 million in the third quarter ended Sept 30 (Q3 FY2023).
Its decision to upgrade the call while retaining a fair value of RM8.40 on the automated test equipment maker is largely due to the rise in price-to-earnings ratio (PE) to 41x from 36x.
The increase is based on expectations of a continued gradual recovery in the semiconductor industry in FY2024.
Despite the weak earnings, the upgrade shows confidence in its well-diversified revenue base and exposure to high-growth industries, namely computing, telecommunications and automotive segments, the research house said.
“We anticipate a gradual recovery and stronger demand in Q1 FY2024 from automated board inspection (ABI) and machine vision system (MVS) segments compared to H2 FY2023,” it said.
Additionally, ViTrox’s geographical diversity may play a crucial role in capturing new customers arising from the trade diversion to the Asean region and Mexico due to the US-China chip war.
However, AmInvestment Bank lowered its earnings forecast for FY2023 to FY2025 by 12% for each year, assuming more conservative sales estimates following the group’s disappointing nine-month results (9M FY2023).
ViTrox’s 9M FY2023 core net profit of RM108 million only accounted for 64% of both the research firm’s and consensus projections for FY2023.
Meanwhile, Hong Leong Investment Bank Research upgraded ViTrox to “hold” from “sell” with a lower target price of RM6.70.
“The group maintains an optimistic outlook regarding the sustained growth in demand from artificial intelligence (AI), telco and auto sectors in the near future,” it said.
“While we like ViTrox’s technology leadership and asset-light business model, we do not expect demand to recover in the short-term as the supply chain continues to operate with excess capacity,” it added.
As of 5pm, ViTrox’s share price was down by 28 sen or 3.89% at RM6.92, giving it a market capitalisation of RM6.54 billion.