ViTrox Corp: Aggressively tapping into China market despite short term challenges

AmBank maintains a BUY with a FV: RM9.00 for the stock. ViTrox Corp‘s 1QFY24 results saw a 30% decline in core net profit due to increased R&D spending, decreased demand in ABI and MVS segments, and higher service costs.

Despite slow orders in consumer electronics and semiconductor sectors, 2QFY24 revenue is expected to be RM121-140mil. Challenges include shipment deferments and competition in China.

To address these, ViTrox plans to revise prices and develop cost-effective models. Despite short-term margin squeeze, a positive outlook is maintained for industry recovery in 2HCY24, supported by diversified revenue streams and aggressive market share pursuit. Stronger performance anticipated in 2HCY24 due to increased sales and margin recovery.

Analysts comments on ViTrox Corp

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“In the near term, we are still seeing a pickup in business activities but orders are still slow in the consumer electronics and back-end semiconductor sectors due to economic uncertainties. Vitrox guided for a revenue of RM121-140mil in 2QFY24, supported by deliveries of new and some existing orders that have
been pushed back in 1QFY24.

“We understand that Vitrox is facing certain challenges for all segments such as (i) shipment deferments due to a slowdown in automotive demand, with deliveries likely to occur in 2HCY24, and (ii) intensive competition in China to gain market share.

“However, we maintain a positive outlook on the industry’s gradual recovery in 2HCY24 and beyond. We are comforted by the group’s well-diversified revenue streams beyond China and its aggressive pursuit of market share within China,” it says.