Vitrox Corporation Berhad

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$VITROX / 0097 (VITROX CORPORATION BERHAD)

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*VITROX 4Q24 briefing keytakes (Hybrid)*

*Date: 28 Feb 2025*

*Management: Chu Jenn Weng (CEO), Lim Kim Seng (CFO)*

*Corp Development*
- Customer Engagement: SMTA International in 2024 in US, NEPCON Asia 2024 in China.
- Agriculture Endeavour: Ranger 1$ (60-70% completion), V-Seerder (100% completion), IOT 4.0 (Still under R&D)
- Student enrolment: Diploma courses and TVET. TVET target 500 students. Diploma courses take up rate encouraging.

*Financial*
- 4Q24 Rev at RM148.8m +5% yoy, +2% qoq. PAT at RM22.3m -4% yoy, +13% qoq with 15% PAT margin. Favorable forex in 4Q24 vs 3Q23 but offset by unfav product mix.
- FY24: Rev552m -4% yoy and OAT RM89m -27%. Due to reduced demand in ABI as EMS customer such as Jabil has lower demand.
- Vitrox Agri Tech loss will be cut to half in 2025.
- FY24 PBT RM103m and adjust PBT of RM130m after adjusted higher R&D RM10m, Investment in New Venture RM9m and unfavourable products mix of RM8m.
- order paused for AI server product in the past few weeks after DeepSeek launched. RM10m AI related product should be shipped to Mexico but this Mexico customer on hold first.
- Vitrox Academy – about 200 students, expect 2028 to breakeven.
- New product: Wafer inspection MEMS speaker for PO from a US based customer.
- 4Q24 Rev breakdown: MVS-S RM14m, MVS-T RM39.4M, ABI RM93.8m and ECS RM1.0m.
- 10% growth from contribution in China. However, competitive in China is stiff.
- Rev breakdown in FY24: MVS-S 7%, MVS-T 29%, ABI 63% and ECS 1%. Strong growth in ECS in 1Q25 due to the new products.
- FY24 Rev growth across segment: ABI -14%, MVSS -20%, MVST +37% and ECS+63%.
- Service revenue: +16% yoy in FY24. Contribute 19% of total revenue. Consist software upgrade and recurring maintenance contracts.
- Machine shipment in 4Q24: MVST 28 units, AOI 93 units, and AXI 29 units.
-Geo rev breakdown: China 43%, US 14%, Malaysia 13%, Taiwan 9%, Mexico 8%, Vietnam 5%, India 3% and Thailand 2%.
- Growth wise: China and US 10% yoy, Taiwan 92% yoy thanks to AI, Vietnam 105% yoy and Thailand 98% yoy.
- Industry Breakdown for FY24: Auto 27%, Telco 21%, CE 18%, Industrial electronic 11%, Computing 8.6%, memory 4.4%, Semicon 3.5%. DC revenue park under telco.
- Inventory days goes up becoz they want to stock up as production time is longer and customer want it very fast.
- Receivables also goes up but will be coming down in 1H25.

*Business Outlook and management update*
- MVSS: Achieved RM14m in 4Q24, strong qoq. Growing demand for Vision system modules particularly for post seal inspection and wafer applications with numerous inquiries converting into orders. 1Q25 rev projected at RM12m, marking 100% increased compare to 1Q24. Competitive pricing: 20% reduction attracting strong interest from major OEM, expand market share in China and among other OSATs. Expanded into semicon Advanced Packaging Sector with VR20, the CoWoS. New venture is expected to generate few million in sales in nest 3-6 months.
- MVST: 20 machines in 1Q25 vs 28 machines in 4Q24. Demand for 40 machines in following 6 months. China contributed 65% of demand. Revenue forecast RM25-30m in 1Q25, slightly lower than revenue in 4Q24.
- ABI: RM85-95m in 1Q25 expected. RM46m backlog. Service revenue about RM20-25m in 1Q25. Shorter lead time expectation which cause their inventory go up. Temporary pause in offshore expansion by Chinese and Taiwanese CMs due to the tariff by US create uncertainties. Contribution from China about 35% of ABI total funnel. 80% of the funnel originates from Chinese EMS. Mexico continues face challenges. US side, seeing opportunities with new projects from aerospace and DC.

*Q&A*
- competitive advantage of QX series from AOI: high speed and high resolution, competitor include TRI and Omron but Vitrox claimed that their speed is 40% faster albeit pricing slightly higher, will be launched this year.
- wafer inspection competitive advantage for Vitrox – customization based on customer needs. Closest competitor: Onto?
- CoWoS advanced packaging – MVST has directly exposure on this. Contribute 30-40% of MVST revenue in 2025.
-Revenue exposure to Huawei on AI – not significant yet.
- book to bill at 1.1x.

Thanks.

$VITROX / 0097 (VITROX CORPORATION BERHAD)
Research by CGSI

AMINVESTMENT TOP PICKS 2025

Putting theory into practice

Coming off a blockbuster year, we take a more balanced approach for Malaysia equities in 2025. We believe market liquidity will still be healthy, as potential cash
received from a spike in privatisation activities and rising cash levels (as a % of AUM), will eventually have to be redeployed. However, due to the high base achieved in 2024, the key challenge for the year ahead is deciding what to buy. Our focus is on sectors that have been relatively unloved and those with strong structural thematics. Stock picking will also play a key role, as pockets of opportunities do exist, within sectors we are Neutral on. Our top picks are CIMB, Gamuda, KL Kepong, Sime Darby Property and Vitrox. Mimicking our views, we are excited to introduce AmResearch’s model portfolio, a tool designed to instil accountability, by empowering clients to track our recommendations.

$VITROX / 0097 (VITROX CORPORATION BERHAD) $SUNCON / 5263 (SUNWAY CONSTRUCTION GROUP BERHAD) $MFCB / 3069 (MEGA FIRST CORPORATION BERHAD)

$VITROX / 0097 (VITROX CORPORATION BERHAD)
Research by CGSI

$VITROX / 0097 (VITROX CORPORATION BERHAD)
Research by HLIB

$VITROX / 0097 (VITROX CORPORATION BERHAD)
Research by Maybank

$VITROX / 0097 (VITROX CORPORATION BERHAD)
Research by HLIB
HOLD – TP RM2.92

" Flattish guidance”

Since the start of 2024, we did not favour the semiconductor equipment/SPE/ATE subsector which ViTrox is part of and its earnings have disappointed over the past six quarters consecutively. After our Sell call, share price plunged near to our TP which is the lowest amongst peers. By summing the mid-points of its guidance and assuming flat sequential growth in ECS, 3Q24 sales could potentially be flat sequentially at RM137m but fall 9% YoY. As downside is <10% now, we upgrade ViTrox to HOLD with an unchanged TP of RM2.92. While we like its technology leadership and asset-light business model, we do not expect demand to recover in the short-term due to excess capacity in the supply chain.

Analyst:
Tan J Young
jytan@hlib.hongleong.com.my

$VITROX / 0097 (VITROX CORPORATION BERHAD)
Research by CGS
Reduce – TP RM3.15

“Rising operational challenges"

■ 2Q24 results missed expectations due to weaker-than-expected margins on the back of wider discounts provided to customers and higher R&D costs.
■ 3Q24 revenue guidance implies only marginal improvement qoq due to challenges from rising competition and election overhang in the US.
■ Downgrade to Reduce with a lower GGM-derived TP of RM3.15 in view of the challenging outlook ahead and lofty valuations at 40.3x FY25F P/E.

Analysts:
Shafiq KADIR
shafiq.abkadir@cgsi.com
Dharmini THURAISINGAM
dharmini@cgsi.com

$VITROX / 0097 (VITROX CORPORATION BERHAD)
Research by Maybank
Sell – TP RM3.40

“2Q24: ABI softness weighs"

ViTrox 2Q24 performance underwhelmed as it struggled to keep abreast with challenging industry headwinds. Pending briefing updates later this morning, we maintain FY24-26E earnings and our TP of MYR3.40. Our TP is pegged to 33x FY25E PER, at -1SD to its LT mean. SELL maintained on less-than-favourable risk-reward and lofty valuations (currently trading at 41x FY25E PER; 17% 3Y fwd earnings CAGR).

Analysts:
Anand Pathmakanthan
anand.pathmakanthan@maybank-ib.com
Arvind Jayaratnam
arvind.jayaratnam@maybank.com

$VITROX / 0097 (VITROX CORPORATION BERHAD)
Research by HLIB
Sell – TP RM2.92

“Slower-than-expected recovery"

1H24 core net profit of RM46m (-32% YoY) was a miss. The deviation was due to lower-than-expected top line and EBITDA margin. Bill-to-book ratio inched up at 1.1x in Jul 2024. It is cautiously optimistic on 2H24 business prospects as the slower-than-expected economic recovery will lead to volatility and challenges ahead. The group is confident in achieving steady growth and improvements in the semiconductor back-end sector. Maintain SELL with lower TP of RM2.92. While we like its 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.

Analyst:
Tan J Young
jytan@hlib.hongleong.com.my

$VITROX / 0097 (VITROX CORPORATION BERHAD)

$MPI / 3867 (MALAYSIAN PACIFIC INDUSTRIES BERHAD) $DUFU / 7233 (DUFU TECHNOLOGY CORP. BERHAD) $PENTA / 7160 (PENTAMASTER CORPORATION BERHAD) $VITROX / 0097 (VITROX CORPORATION BERHAD)

$VITROX / 0097 (VITROX CORPORATION BERHAD)

TRANSACTIONS (CHAPTER 10 OF LISTING REQUIREMENTS) : RELATED PARTY TRANSACTIONSVITROX CORPORATION BERHAD (VCB or Company)
- AWARDING A CONTRACT IN RELATION TO THE EARTHWORK, PILING & MAIN BUILDING WORKS FOR "CADANGAN MEMBINA 1 UNIT PUSAT LATIHAN DAN PUSAT PENYELIDIKAN INDUSTRI 5 TINGKAT SERTA 1 UNIT PENCAWANG TNB DI ATAS SEBAHAGIAN LOT PT 6145 (PLOT LAMA 323B) & SEBAHAGIAN LOT PT 6141 (PLOT LAMA 323C), PERSIARAN CASSIA SELATAN 10, TAMAN PERINDUSTRIAN BATU KAWAN, MUKIM 13, SEBERANG PERAI SELATAN, PULAU PINANG"

DEALINGS IN LISTED SECURITIES (CHAPTER 14 OF LISTING REQUIREMENTS) : Intention to Deal During Closed Period

DEALINGS IN LISTED SECURITIES (CHAPTER 14 OF LISTING REQUIREMENTS) : Dealings Outside Closed Period

Changes in Director's Interest (Section 219 of CA 2016) - SIAW KOK TONG

Changes in Director's Interest (Section 219 of CA 2016) - CHU JENN WENG

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - SIAW KOK TONG

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - CHU JENN WENG

DEALINGS IN LISTED SECURITIES (CHAPTER 14 OF LISTING REQUIREMENTS) : Dealings Outside Closed Period

Changes in Director's Interest (Section 219 of CA 2016) - YEOH SHIH HOONG

Changes in Director's Interest (Section 219 of CA 2016) - CHUAH POAY NGEE

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - YEOH SHIH HOONG

Changes in Director's Interest (Section 219 of CA 2016) - SIAW KOK TONG

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - CHU JENN WENG

NEW ISSUE OF SECURITIES (CHAPTER 6 OF LISTING REQUIREMENTS) : BONUS ISSUESVITROX CORPORATION BERHAD ("VITROX" OR "COMPANY")

BONUS ISSUE

DEALINGS IN LISTED SECURITIES (CHAPTER 14 OF LISTING REQUIREMENTS) : Dealings Outside Closed Period

Changes in Director's Interest (Section 219 of CA 2016) - DATO' SERI DR KIEW KWONG SEN

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - SIAW KOK TONG