Notwithstanding expected improvement in sequential 2Q24E earnings from order backlogs, Maybank Investment Bank (Maybank IB) expects the industry's outlook to be challenging for ViTrox Corporation Bhd (ViTrox).

Maybank IB has lowered their FY24-26E earnings forecast by 20%/16%/14% and their TP to MYR3.40 (-14%) on ViTrox. While they continue to like ViTrox for its strong management team and diversified exposure to key high-growth industries (5G/EVs/AI), Maybank IB has downgraded their call to SELL on current valuations.

Maybank IB, in a note today, said following slow 1Q24 core net profit of MYR17.7m (-51% YoY, -35% QoQ), they expect sequential improvement in 2Q24E on delivery improvements in the OSAT-centric MVS-T/S segments.

Underpinned by order backlogs, Maybank IB expects 2Q24E segmental turnover to rise +65%/+60% QoQ for MVS-T/S respectively.

However, beyond 2Q24E earnings, both segments face headwinds from (i) capacity constraints in material sourcing/lead-times, (ii) slower pace of OSAT recovery in the automotive, industrials and telco end-markets.

The bank noted that the ATE market dynamics in China, ViTrox's largest geographical market, has structurally shifted in recent quarters. There could be margin pressures for R&D and marketing spend to improve on product features to defend their market share position.
VIT a small step towards addressing talent shortage

Separately, ViTrox announced yesterday the construction of its MYR46m research and training facility, VIT. Completion is expected in Jan 2026. VIT aims to supplement its existing ViTrox College initiative, allowing it to more than double its student intake capacity from 200 to 450 annually.