VITROX CORPORATION
What’s being assumed?
Rationale for report: Company Result
(Downgraded)
| Price | RM3.97 |
| Fair Value | RM2.75 |
| 52-week High/Low | RM4.30/RM2.28 |
| Key Changes | |
|---|---|
| Fair value | ⬆ |
| EPS | ⬆ |
| YE to Dec | FY24 | FY25F | FY26F | FY27F |
|---|---|---|---|---|
| Revenue (RM mil) | 552.3 | 674.4 | 698.2 | 855.3 |
| Core net profit (RM mil) | 98.7 | 140.3 | 146.6 | 182.2 |
| FD Core EPS (sen) | 5.2 | 7.4 | 7.7 | 9.6 |
| FD Core EPS growth (%) | (19.2) | 42.0 | 4.5 | 24.3 |
| Consensus Net Profit (RM mil) | – | – | – | – |
| DPS (sen) | 1.6 | 2.2 | 2.3 | 2.9 |
| PE (x) | 76.1 | 53.5 | 51.2 | 41.2 |
| EV/EBITDA (x) | 61.8 | 43.3 | 41.3 | 33.5 |
| Div yield (%) | 0.4 | 0.6 | 0.6 | 0.7 |
| ROE (%) | 9.1 | 13.1 | 12.4 | 14.1 |
| Net Gearing (%) | nm | nm | nm | nm |
Investment Highlights
Vitrox’s 2Q25 earnings (+26% YoY) was boosted by stockpiling, but the strength has surprisingly extended into 3Q25, as trade deals improve investment clarity at the customer level. That said, the stock has seen a strong rerating driven by a flight to quality, elevating the risk of disappointment should its current growth trajectory falter. With share price pricing in a best-case scenario, we downgrade Vitrox to SELL at a lower target price of RM2.75/share (from RM2.40)
- Downgrade to SELL. We value Vitrox at a revised TP of RM2.75/share (from RM2.40). This is based on an unchanged target PE of 31x. We use a blended CY26/27 EPS to capture a 12-month view. However, we downgrade the stock to SELL (from U-PF), as we believe share price is already pricing in a best-case scenario.
- What’s being assumed? Anchoring it to its 5-year average PE of 39x, the market is currently pricing in forward earnings of RM192mil (+38% YoY). During the last five years, the group has only managed to achieved growth within that region during the Covid-19 era, which was driven by work from home demand. Based on Am’s and consensus earnings projections, the group is trading at an implied PE of 51x and 44x, which is roughly 1sd above its 5-year average.
- Al still as small contributor. Although Al revenues (+32% YoY) represents a structural growth opportunity, estimated contributions are currently at 11% of 1H25 group revenues. Hence, concerted growth will still be required from its other end markets to meet present expectations. We expect FY26F earnings to be flattish, taking the view that tariffs will induce a slowdown in end demand.
- 3Q25 revenue strength to sustain on trade clarity. Management is guiding for 3Q25 revenues of between RM175mil (+19% YoY, -4% QoQ) and RM198mil (+35% YoY, +8% QoQ). This is driven by a resumption of investments by its customers, as the announcements of trade deals provide better clarity. 1H25 earnings beat our expectations, forming 75% of our previous estimates, due to stockpiling. We had previously preemptively trimmed out numbers, anticipating delays in capex decisions amid tariff uncertainty. We raise FY25F earnings by 70%. Our FY26F and FY27F earnings are adjusted slightly by 3% and 1%.
Stock and Financial Data
| Shares Outstanding (million) | 1,891.8 |
| Market Cap (RMmil) | 7,510.6 |
| Book Value (RM/Share) | 0.54 |
| P/BV (X) | 7.4 |
| ROE (%) | 9.1 |
| Net Gearing (%) | – |
Major Shareholders
| Chu Jenn Weng | 26.6% |
| Siaw Kok Tong | 17.7% |
| Yeoh Shih Hoong | 8.6% |
| Free Float | 30.8 |
| Avg Daily Value (RMmil) | 5.5 |
Price performance
| 3mth | 6mth | 12mth | |
|---|---|---|---|
| Absolute (%) | 31.5 | (0.5) | (0.8) |
| Relative (%) | 30.4 | 0.7 | 4.4 |
EXHIBIT 1: 2Q25 EARNINGS SUMMARY
| FYE Dec | 2Q25 | 2Q24 | YoY (%) | 1Q25 | QoQ (%) | 1H25 | 1H24 | YoY (%) |
|---|---|---|---|---|---|---|---|---|
| Revenue | 183 | 137 | 33.4 | 141 | 29.7 | 324 | 257 | 26.2 |
| Ebitda | 48 | 33 | 46.5 | 31 | 53.6 | 79 | 53 | 49.7 |
| Depreciation and amortisation | -4 | -3 | 18.2 | -4 | -1.2 | -8 | -6 | 19.1 |
| Ebit | 44 | 29 | 49.6 | 27 | 61.3 | 71 | 46 | 53.9 |
| Finance income | 3 | 3 | 9.9 | 3 | 14.2 | 6 | 6 | 3.6 |
| Finance costs | -1 | -1 | 33.1 | -1 | 105.9 | -2 | -2 | -2.5 |
| JV/Associates | 0 | 0 | 793.3 | -1 | -65.4 | -1 | 0 | 313.5 |
| EI | -8 | 0 | 2,395.8 | -1 | 489.5 | -9 | 0 | 7,128.6 |
| Pbt | 38 | 31 | 22.0 | 27 | 38.3 | 65 | 50 | 30.8 |
| Tax | -10 | -3 | 214.5 | -4 | 188.0 | -14 | -5 | 169.8 |
| MI | 0 | 0 | 38.7 | 0 | 28.3 | 1 | 0 | 28.9 |
| Patami | 28 | 28 | 0.1 | 24 | 16.4 | 52 | 45 | 15.4 |
| Core Patami | 36 | 28 | 26.4 | 25 | 41.0 | 61 | 45 | 35.1 |
| EPS (sen) | 1.5 | 1.5 | 0.7 | 1.3 | 16.4 | 2.8 | 3.3 | -16.1 |
| DPS (sen) | 0.7 | 1.1 | -36.4 | 0.0 | n/a | 0.7 | 1.1 | -36.4 |
Profitability ratios (%)
| EBITDA margin | 26.0 | 23.7 | 2.3 | 22.0 | 4.1 | 24.3 | 20.5 | 3.8 |
| EBIT margin | 24.0 | 21.4 | 2.6 | 19.3 | 4.7 | 21.9 | 18.0 | 3.9 |
| PBT margin | 20.7 | 22.7 | -1.9 | 19.4 | 1.3 | 20.2 | 19.4 | 0.7 |
| Net profit margin | 19.6 | 20.7 | -1.1 | 18.1 | 1.6 | 18.9 | 17.7 | 1.2 |
| Tax rate | 26.5 | 10.3 | 16.1 | 12.4 | 14.0 | 20.5 | 10.1 | 10.5 |
Revenue breakdown (RMm)
| ECS | 2 | 1 | 41.7 | 2 | 13.3 | 3 | 2 | 39.1 |
| ABI | 111 | 82 | 36.7 | 96 | 16.3 | 207 | 167 | 24.1 |
| MVS-T | 53 | 44 | 21.0 | 33 | 59.5 | 86 | 71 | 21.3 |
| MVS-S | 15 | 10 | 47.5 | 10 | 47.5 | 25 | 16 | 60.3 |
Unit shipment
| AOI | 120 | 40 | 200.0 | 56 | 114.3 | 176 | 99 | 77.8 |
| AXI | 32 | 29 | 10.3 | 34 | -5.9 | 66 | 57 | 15.8 |
| MVS-T | 33 | 26 | 26.9 | 20 | 65.0 | 53 | 44 | 20.5 |
| MVS-S | 358 | 269 | 33.1 | 234 | 53.0 | 592 | 428 | 38.3 |
Source: Vitrox
EXHIBIT 10: REVENUE BREAKDOWN BY END MARKET
| End Market | Percentage |
|---|---|
| Automotive | 35% |
| Telco | 18% |
| Consumer | 15% |
| Industrial | 11% |
| Computing | 6% |
| Mobile | 4% |
| Memory | 4% |
| Aerospace | 4% |
| Semicon | 3% |
Source: Vitrox
EXHIBIT 11: CHANGE IN EARNINGS
| RMmil | FY25F | FY26F | FY27F | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Old | New | % | Old | New | % | Old | New | % | |
| Revenue | 467 | 674 | +45% | 623 | 698 | +12% | 780 | 855 | +10% |
| Earnings | 82 | 140 | +70% | 141 | 146 | +3% | 179 | 182 | +1% |
Source: AmInvestment Bank
EXHIBIT 12: VALUATIONS
| Target PE (x) | 31x |
| Blended FY26/27 EPS | 8.69 sen (from 7.5 sen) |
| ESG premium | x3.0% premium |
| 12-month target price | RM2.75 (from RM2.40) |
Source: AmInvestment Bank
Company profile
Vitrox is a machine vision company. Through its MVS (machine vision solution) and ABI (automated board inspection) segments, the group serves the top 10 OSAT (outsourced semiconductor assembly and test) and EMS (electronics manufacturing services) customers.
Utilising high resolution cameras and image processing algorithms, its equipment help customers inspect components and PCBs (printed circuit boards) for visual defects and dimensional inconsistencies. By detecting defects early, this prevents faulty products from advancing in the production line, reducing the expense of rework and waste. Less defects also translate to fewer product returns, warranty claims and the risk of brand damage down the road.
Investment thesis and catalysts
Priced to perfection.
The stock has seen a strong rerating driven by a flight to quality, elevating the risk of disappointment should its current growth trajectory falter. Vitrox currently trades at 1sd above its 5-year average PE.
Supply chain relocation.
Companies are increasingly adopting a China plus One strategy, in response to higher tariffs due to the US-China trade war. Vitrox benefits from capex associated with the establishment of new EMS and OSAT facilities.
Advanced packaging.
Semiconductor packages are becoming more complex, with advanced packaging technologies such as ball grid array, chip scale packages, flip-chip and quad flat no-lead packages. These packages require X-ray inspection to detect defects like solder voids or hidden joints, which optical inspection alone cannot reveal.
Rising quality standards.
Certain industries such as automotive, aerospace and healthcare demand high quality and defect free products. AOI and AXI machines help manufacturers achieve these demands, by providing a precise and non-destructive way of testing.
Valuation methodology
We value Vitrox based on a target PE of 31x and blended CY26/27 EPS. We peg valuations to 1sd below its 5-year average, due to the ongoing trade war, leading to an uncertain end demand environment. That said, our target PE remains at a premium to peers, as we account for the group’s strong management team, product leadership and customer diversity.
Risk factors
Due to its diversified customer base and end market exposure, revenues are correlated to the ups and downs on the semiconductor cycle.
In terms of currency, 90% of the group’s sales are conducted in USD. We estimate every 1% increase/decrease in the USD/MYR rate increases/decreases earnings by 2%.
Trading liquidity for the stock is low, as the founders hold 56% of the group. The group also has a strong following of long-term shareholders.
EXHIBIT 13: FINANCIAL DATA
Income Statement (RMmil, YE 31 Dec)
| FY23 | FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|---|
| Revenue | 574.9 | 552.3 | 674.4 | 698.2 | 855.3 |
| EBITDA | 140.3 | 116.8 | 165.2 | 171.1 | 209.5 |
| Depreciation/Amortisation | (11.1) | (12.8) | (13.9) | (14.2) | (14.5) |
| Operating income (EBIT) | 129.2 | 104.0 | 151.3 | 156.8 | 195.0 |
| Other income & associates | (0.6) | ||||
| Net interest | 6.2 | 8.5 | 4.5 | 6.0 | 7.3 |
| Exceptional items | 6.1 | (8.6) | |||
| Pretax profit | 141.6 | 103.3 | 155.9 | 162.8 | 202.4 |
| Taxation | (14.0) | (13.9) | (15.6) | (16.3) | (20.2) |
| Minorities/pref dividends | 0.7 | 0.7 | |||
| Net profit | 128.3 | 90.1 | 140.3 | 146.6 | 182.2 |
| Core net profit | 122.2 | 98.7 | 140.3 | 146.6 | 182.2 |
Balance Sheet (RMmil, YE 31 Dec)
| FY23 | FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|---|
| Fixed assets | 290.2 | 300.7 | 342.7 | 348.5 | 354.0 |
| Intangible assets | 5.6 | 8.8 | 8.8 | 8.8 | 8.8 |
| Other long-term assets | 65.3 | 76.5 | 76.5 | 76.5 | 76.5 |
| Total non-current assets | 361.1 | 386.0 | 428.1 | 433.9 | 439.4 |
| Cash & equivalent | 389.0 | 340.1 | 400.8 | 486.7 | 535.2 |
| Stock | 198.6 | 201.4 | 235.3 | 243.7 | 298.5 |
| Trade debtors | 191.1 | 237.0 | 260.5 | 269.6 | 330.3 |
| Other current assets | 26.6 | 44.4 | 44.4 | 44.4 | 44.4 |
| Total current assets | 805.3 | 822.9 | 941.0 | 1,044.3 | 1,208.3 |
| Trade creditors | 115.2 | 101.4 | 157.5 | 163.1 | 199.7 |
| Short-term borrowings | 13.5 | 13.0 | 7.2 | 7.2 | 7.2 |
| Other current liabilities | 25.7 | 33.6 | 33.6 | 33.6 | 33.6 |
| Total current liabilities | 154.3 | 148.0 | 198.3 | 203.8 | 240.5 |
| Long-term borrowings | 48.9 | 34.9 | 40.7 | 40.7 | 40.7 |
| Other long-term liabilities | 5.7 | 7.0 | 7.0 | 7.0 | 7.0 |
| Total long-term liabilities | 54.7 | 41.9 | 47.7 | 47.7 | 47.7 |
| Shareholders’ funds | 958.9 | 1,021.5 | 1,125.6 | 1,229.1 | 1,362.0 |
| Minority interests | (1.5) | (2.4) | (2.4) | (2.4) | (2.4) |
| BV/share (RM) | 1.01 | 0.54 | 0.59 | 0.65 | 0.72 |
Cash Flow (RMmil, YE 31 Dec)
| FY23 | FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|---|
| Pretax profit | 141.6 | 103.3 | 155.9 | 162.8 | 202.4 |
| Depreciation/Amortisation | 11.1 | 12.8 | 13.9 | 14.2 | 14.5 |
| Net change in working capital | 3.5 | (72.0) | (1.3) | (11.9) | (78.8) |
| Others | (12.2) | (17.3) | (20.1) | (22.3) | (27.6) |
| Cash flow from operations | 144.0 | 26.8 | 148.3 | 142.8 | 110.5 |
| Capital expenditure | (75.1) | (23.0) | (56.0) | (20.0) | (20.0) |
| Net investments & sale of fixed assets | 8.0 | (15.9) | |||
| Others | 8.8 | 13.1 | 7.4 | 8.9 | 10.2 |
| Cash flow from investing | (58.3) | (25.8) | (48.6) | (11.1) | (9.8) |
| Debt raised/(repaid) | (12.6) | (12.6) | |||
| Equity raised/(repaid) | 0.6 | 0.1 | |||
| Dividends paid | (51.0) | (32.6) | (36.2) | (43.0) | (49.3) |
| Others | (4.3) | (3.9) | (2.9) | (2.9) | (2.9) |
| Cash flow from financing | (67.2) | (49.0) | (39.0) | (45.9) | (52.2) |
| Net cash flow | 18.5 | (47.9) | 60.7 | 85.8 | 48.5 |
| Net cash/(debt) b/f | 370.4 | 389.0 | 340.1 | 400.8 | 486.7 |
| Net cash/(debt) c/f | 389.0 | 340.1 | 400.8 | 486.7 | 535.2 |
Key Ratios (YE 31 Dec)
| FY23 | FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|---|
| Revenue growth (%) | (23.4) | (3.9) | 22.1 | 3.5 | 22.5 |
| EBITDA growth (%) | (30.6) | (16.8) | 41.5 | 3.5 | 22.5 |
| Pretax margin (%) | 24.6 | 18.7 | 23.1 | 23.3 | 23.7 |
| Net profit margin (%) | 22.3 | 16.3 | 20.8 | 21.0 | 21.3 |
| Interest cover (x) | nm | nm | nm | nm | nm |
| Effective tax rate (%) | 9.9 | 13.5 | 10.0 | 10.0 | 10.0 |
| Dividend payout (%) | 39.8 | 36.2 | 25.8 | 29.4 | 27.1 |
| Debtors turnover (days) | 141 | 141 | 135 | 139 | 128 |
| Stock turnover (days) | 127 | 132 | 118 | 125 | 116 |
| Creditors turnover (days) | 85 | 72 | 70 | 84 | 77 |
Source: Company, AmInvestment Bank Bhd estimates
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