Supply Constraints Cap Upside: Management highlighted material and manpower shortages as key constraints. MVST had a backlog of over 70 units but could only ship ~60 in 1Q. RM300m in POs for Q1 could not be fully fulfilled. Despite this, order visibility remains strong with backlog fully booked until October at RM125m for MVST alone.
AI Drives 50% of Order Book: AI-related orders now constitute approximately 50% of the total order book. Key growth drivers include AI server manufacturing, advanced packaging, and data centre buildouts. CSP capex exceeding $500bn for AI servers underpins multi-year demand visibility. Humanoid robotics production is also set to commence soon, adding a new vertical.
Maintain BUY, TP RM7.04: We make no changes to our earnings forecast. Target price of RM7.04 is based on 46x FY27F EPS of 15.3 sen, representing +1SD above ViTrox’s 5-year historical average PE of 40x.
Results Recap. 1QFY26 core net profit of RM60.8m (+120% YoY, +36% QoQ) exceeded both our and consensus expectations, coming in at 31% of our full-year FY26 forecast of RM194.8m. The outperformance was driven by stronger-than-expected billings from both ABI and MVS segments, alongside improving margins and a significantly lower effective tax rate of 17.6% (4QFY25: 24.9%) as the MIDA pioneer tax incentive for VTSB took full effect. Revenue surged 89% YoY to RM267.1m, while EBIT margin expanded to 23.1% (1QFY25: 20.4%). Some of the newer products qualify for additional tax incentives, which should further support the declining effective tax rate trajectory – management targets ~10% by Q3 and single digits by Q4.
MVST. Q2 revenue is forecast at c.RM85–95m, with potential upside pending resolution of capacity constraints. Management expects to deliver 70–90 units in Q2 (vs. ~60 in Q1), with monthly production capacity ramped to ~40 units from 30 previously. The segment is fully booked until October with a backlog of RM125m.
Growth is primarily driven by China (consumer electronics, IoT, data computing), the Philippines, and Malaysia. ViTrox has also successfully penetrated a major Chinese player, though margins will be less lucrative, it will be compensated by higher volumes. Service revenue is expected to sustain above RM30m/quarter, with the next major growth cycle anticipated in approximately 2 years. Overseas sales continue to dominate at 86% of total revenue. New AI-enabled features such as auto-setup and AI-assisted retesting should allow ViTrox to continue to command premium pricing.
ABI. ABI is in a significant ramping phase following the earlier MVST-led upcycle momentum, carrying a strong order backlog of RM233m with Q2 revenue projected at c.RM150–160m. Key demand drivers include the AI server market, which requires larger-format platforms such as the XLDN model at higher ASPs but longer build times. The AXI product mix stands at ~70% V810 and ~30% QX1, expected to shift to 50:50 or 60:40 in favour of QX1 by 2H2026 as demand accelerates for higher-speed inspection of increasingly complex AI data centre boards.
A key CSP customer is also planning to set up 100 SMT lines, translating into 33 AXI purchase orders, with many customers booking through 2027. At current capacity, production will reach 60 units/month – 40 allocated for scanning equipment and 20 for QX1. X-ray inspection is currently supply-constrained, benefiting ViTrox given its leading detection rate versus their competitors.
China. Management disclosed plans to accelerate the establishment of ViTrox China within the next 6 months. The entity will be 100% owned by ViTrox (not a JV), utilizing a local partnership to fulfil “made in China” requirements. The approach will involve leasing rather than building factory space. This is a strategic response to Chinese government incentives encouraging Tier 1 OSATs in China to procure domestically-manufactured equipment. Management views this as a significant growth opportunity to further deepen penetration into the Chinese market.
Supply Chain. The company faces shortages across manpower and materials including chips from companies like Intel (necessitating alternatives like AMD for example), memory, GPUs, CPUs, and cameras. ViTrox procures 6 months ahead but demand continues to outstrip supply, with management now extending procurement to 9 months. Each machine takes 4–8 weeks to complete, but some customers want delivery within 4 weeks, forcing build-ahead inventory.
The company is also actively mitigating bottlenecks through supplier diversification and module redesign, absorbing some cost increases while passing most to customers. The constraint lies in materials and labour – currently ~300 subcontractors on the production floor with a need for an additional 200+. In terms of orderflow, there are no signs of orders slowing, this is supported by the ongoing capex cycle at major fabs and hyperscalers.
Outlook. We view the current capacity constraints as a positive signal rather than a structural concern – they reflect the strength of underlying demand rather than operational weakness. With ViTrox actively ramping production capacity, extending procurement lead times to 9 months, and diversifying its supplier base, we expect these bottlenecks to be progressively resolved over the coming quarters. More importantly, the supply-constrained environment affords ViTrox greater bargaining power on pricing and customer commitments, supporting both ASP expansion and longer-term order visibility. We continue to remain strongly positive on ViTrox's growth trajectory. AI-related orders now comprise approximately 50% of the order book, with demand not yet including the recent surge in the CPU segment. The 1QFY26 book-to-bill ratio stood at 1.3x, with contract liabilities nearly tripling QoQ to RM90.3m, underscoring robust demand. Key growth verticals beyond AI servers include humanoid robotics, automotive, and physical AI applications representing the next wave beyond digital AI. Furthermore, rising complexity in AI data centre boards drives higher inspection requirements, naturally benefiting ViTrox's product suite.
Forecast. We make no changes to our earnings forecast.
Valuation & Recommendation. Maintain BUY with a TP of RM7.04 (46x FY27F EPS of 15.3 sen), implying 27.8% total upside from RM5.52. Our target multiple represents +1SD above ViTrox’s 5-year historical average PE of 40x, reflecting: (i) rising exposure to high-growth segments such as HPC/AI server manufacturing and advanced semiconductor packaging; and (ii) strong double-digit earnings growth over the forecast horizon. At the current share price, the stock trades at ~44x FY26F core PE, which we view as undemanding given the strong earnings trajectory and structural demand drivers. The post-briefing picture reinforces the bull case: capacity being expanded, order books robust through 2027, AI driving 50% of orders, and China expansion providing a new growth vector. Re-rating potential is significant as earnings execution gains visibility in coming quarters.
Risks. Appreciation of RM against USD, US semiconductor tariffs and geopolitical uncertainties, slowdown in semiconductor and DC upcycle, potential escalation of trade tensions impacting global semiconductor supply chains.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 3.952219 | 3.979032 |
| EUR | 4.632284 | 4.636049 |
| CNY | 0.579684 | 0.580150 |
| HKD | 0.504395 | 0.507834 |
| SGD | 3.092296 | 3.113419 |