ViTrox Corp (VITRO MK; BUY; TP: MYR7.20) - More ‘V’room for growth

ViTrox Corp (VITRO MK; BUY; TP: MYR7.20) - More ‘V’room for growth

• From glory to glory. We remain upbeat on ViTrox post its 1Q17 results briefing last Friday; order backlog remains solid especially at its ABI division whereby order backlog hit MYR50m (as of early May) with more major orders in the pipeline. Earnings visibility has improved beyond 3Q17 while longer term prospects remain promising with Campus 2.0 coming into the picture in 3Q17. Our forecasts and MYR7.20 TP (pre 1-for-1 bonus) are unchanged. BUY ViTrox for its multi-year earnings growth prospects.
• 2Q17 could scale greater heights? On strong order backlog especially at its ABI division (both AOI and AXI), we believe that ViTrox’s 2Q17 revenue could hit MYR75m-80m, breaking all of its previous revenue records, yet again. The strong order backlog also means that the revenue momentum could sustain into 3Q17, at least. While floor space and lead time for the crucial parts are potential bottlenecks, we believe that ViTrox’ story does not end in 2017 as it continues to venture further into inspection automation of new products (i.e. wafer, CMOS sensor, non-tech related - auto parts).
• Arguably a champion in X-ray inspection equipment. With core expertise in X-ray inspection, ViTrox is arguably one of a handful of equipment players with leading technology beyond its time which will reap the benefits of its R&D going forward. Despite concerns of on-going competition globally, the overall sector is still going through a structural change whereby inspection automation will replace human labour, no longer effective in carrying out inspection of tiny components. ViTrox’ visibility should extend beyond the near-term order backlogs.