A large chunk of the surge in its PBT can be attributed to the depreciation of the ringgit — by over 20% — against the greenback in 2015. About 90% of VS Industry’s sales proceeds and 63% of its cost of sales are US dollar denominated, making it a beneficiary of the greenback’s appreciation against the ringgit, says JF Apex Securities Bhd.

Its revenue grew 12.9% year on year to RM1.94 billion in FY2015 on the back of larger sales orders, mainly for export markets.

Despite the ringgit’s rebound this year, which normalises the advantage VS Industry enjoyed from the foreign exchange difference, JF Apex opines that the company could overcome the headwinds as sales growth more than offset the weaker average selling price in ringgit terms.

“For the bottom line, the group’s gross profit margin may slide marginally or stay flat in view of the rising cost of material coupled with recognition of limited forex gain or even forex loss incurred following the uptick of the ringgit against US dollar. But this will be mitigated by operational efficiency and earnings improvement in overseas productions with both Indonesia and China operations returning to the black,” the research house wrote in a recent note.

VS Industry’s three main customers are Keurig, Dyson and Zodiac, which contribute about 55% of revenue. Customers from the US contribute the largest chunk to revenue at about 30%, followed closely by Malaysia at 28.7%.

In its 2015 annual report, the company said the Southeast Asian region is becoming increasingly attractive as an outsourcing destination with its relatively affordable labour cost, protection of intellectual property rights and propensity to achieve higher standards of product quality. This provides it a chance of expanding its clientele base even further, given its proven track record of servicing renowned international product market leaders.

It will also be placing greater emphasis on capturing higher value-added activities in research and development and designing, so that it can achieve superior features for its customers on top of greater cost savings.

Going forward, JF Apex opines that the company could clinch more orders in respect of box build full assembly for the new model of vacuum cleaner from Dyson. “The company could bag as much as RM300 million new orders per annum from Dyson starting FY2017F over a period of three to five years. Hence, this shall lift the company’s earnings by 12.6% for FY2017 and 10.8% for FY2018F. This is on top of the existing Dyson’s model with job scope worth estimated RM650 million in FY17F,” says the research house.

Besides that, the company added that it will also be considering the merger and acquisition route of related businesses to complement organic growth. “While mindful of the challenges that lie ahead, backed by these growth plans, we are confident that the coming years would surely be an exciting phase for VS Industry, as we make our mark in the global EMS sector,” it said.

Four analysts had a “buy” call on the stock with target prices ranging from JF Apex’ RM1.50 to RHB Research Institute’s RM1.72, averaging at RM1.64, Bloomberg data show at the time of writing.