KUALA LUMPUR: CIMB Securities Sdn Bhd has upgraded ViTrox Corp Bhd to "Buy" from "Hold", raising its target price to RM5.90 on stronger earnings prospects and sustained sales momentum.
The research house also lifted its earnings per share forecasts for financial year 2026 (FY26) and FY27 by seven per cent to 15 per cent.
This was driven by higher shipment volumes from ViTrox's machine vision system tray (MVST) and automated board inspection (ABI) segments, as well as a lower effective tax rate following a new tax incentive award.
CIMB Securities said these factors more than offset foreign exchange headwinds from a stronger ringgit, with its ringgit/US dollar assumption revised to RM3.90 to RM4 per US dollar.
"We believe the premium is warranted, supported by a projected two-year core net profit compound annual growth rate of 31 per cent, driven by margin expansion from the product upgrade cycle and structural artificial intelligence (AI)-led demand growth," it said in a note.
ViTrox has guided for first-quarter FY26 revenue of RM237 million to RM274 million, implying up to 94 per cent year-on-year growth at the upper end.
The company expects strong sales momentum to extend into the first half of FY26, underpinned by a robust order book across its MVST and ABI segments.
CIMB Securities said the recent launch of the next-generation QX1 Series, featuring high-speed, high-resolution 3D X-ray printed circuit board assembly inspection capabilities for AI servers, telecommunications and automotive applications, is expected to further drive revenue growth.
Total purchase orders reached a record RM302.5 million as at end-December 2025, compared with RM269 million at end-September, while the book-to-bill ratio remained healthy at 1.1 times.
To meet rising demand, ViTrox plans to increase monthly MVST assembly capacity to 40 machines from 30 by end-first quarter 2026, supported by a 30 per cent expansion in floor space at Campus 2.
Separately, its automated X-ray inspection (AXI) manufacturing operations at Campus 3 are set to commence by mid-March, lifting monthly production capacity to 48 units from 30.
"The group is also securing additional raw materials and inventories to shorten lead times and manage short-order surges. These initiatives should ease capacity bottlenecks and support sustained revenue growth in 2026," the firm said.
ViTrox's service revenue rose 18 per cent year-on-year to RM125.9 million in FY25, driven by stronger service contract uptake from AXI customers, accounting for 15 per cent of group revenue.
CIMB viewed this positively, noting that service income provides recurring revenue, reduces volatility from equipment delivery cycles and carries healthy margins.
"We expect double-digit service growth in FY26, with acceleration in FY27 and FY28 as the installed base expands.
"With a record 382 AXI machines delivered in FY25 and a typical one- to two-year warranty period, we anticipate meaningful conversion into post-warranty paid service contracts, creating a steady and visible earnings tailwind," it added.
On the fiscal front, ViTrox has secured a new five-year tax incentive from the Malaysian Investment Development Authority, extendable for another five years from November 2025.
The incentive covers the development and production of 4D advanced industrial automation systems for semiconductor advanced packaging and AI smart factory applications.
"As the revenue mix gradually shifts towards qualifying products, ViTrox expects its effective tax rate to decline from 25 per cent in the fourth quarter of last year to the low teens by the fourth quarter of 2026.