VSI reported a record 4QFY24, leading to a full-year core net profit of MYR191m, beating Maybank's and consensus expectations by 19%/11%, thanks to better-than-expected margins. The house has adjusted its FY25E/FY26E earnings by +2%/- 1% due to housekeeping and introduced FY27E. It has also raised the TP by 2% to MYR1.49 (on unchanged 20.5x CY25E PER; +0.5SD to the 5Y mean).

Notably, 4Q driven by higher utilisation, better product mix VSI's 4QFY24 core net profit (CNP, excluding one-offs) surged 75% QoQ to MYR92m (+81% YoY) as revenue increased 20%, driven by improved plant utilization and a better product mix. 4QFY24 EBIT margin rose 1.8 ppt QoQ to 9.0%. FY24 CNP was down 8% YoY to MYR191m, with revenue down 7% YoY due to lower sales orders from a key customer in 1H.

Geographically, Malaysia's PBT in FY24 rose 3% YoY to MYR259m despite an 11% YoY revenue decline, driven by a better sales mix and improved plant utilization in 2H. In contrast, Indonesia's PBT fell 13% YoY to MYR6m, despite flat revenue, as strong 4QFY24 sales from a key customer were offset by 1H losses.

Maybank said it remains optimistic about VSI's outlook. After streamlining operations and expanding, VSI is well-positioned to benefit from increasing sales orders, especially with new model launches. Value chain enhancements, already showing progress in 2HFY24, should further boost profit margins. Additionally, its new operations in the Philippines are expected to contribute significantly, with potential upside from a prospective customer expected to be concluded by end-CY2024. Key risks include geopolitical factors and forex fluctuations, which could pressure margins.