Excluding foreign exchange (FX) gains amounting to RM15.3m, Inari Amertron (Inari) registered a lower core profit of RM307.9m (YoY: -16.2%) for FY23, dragged by weaker sales contributions from all core segments. The results were below our and market expectations, making up only 88% and 93% of full-year numbers, respectively. Despite the weaker-than expected results for FY23, we retain our FY24-26F earnings forecasts as we expect to see a strong recovery in semiconductor sales next year, boosted by new contributions from its JV in China, and new product launches. We reiterate our Outperform call with an unchanged TP of RM3.53 based on 35x FY24 EPS. A lower fourth DPS of 2sen (vs 4QFY22: 2.2sen) was declared for the quarter, bringing the full-year DPS to 8.2sen (FY22: 10sen).

• Weaker YoY sales. During the quarter, Inari’s revenue contracted 11% YoY to RM298.7m, dragged by weaker sales from i) radio frequency, ii) optoelectronics and iii) generic segments. Stripping out net FX gain of RM17.5m, 4QFY23 core earnings tumbled 30% YoY to RM48.8m, attributed to weaker earnings contributions from all core segments, and higher energy costs. Gross margin weakened from 28.4% to 17.9% on the back of lower utilization for the RF segment, and higher operating costs.

• Apple’s iPhone 15 set for 12th Sept launch. Apple’s next-generation iPhone 15 is slated for sales launch around 12th Sept. The new iPhone models are expected to use a USB-C charging port, after the European Union passed a landmark law in October last year requiring all mobile phones, tablets and cameras sold in the EU to use USB-C for wired charging, with a deadline of 28th Dec 2024. Industry experts are quietly bullish about the new iPhones and is projected to help Apple surpass Samsung as the top smartphone brand in 2024. During a recent briefing, management of Apple Inc indicated a weaker YoY revenue performance in the company’s fiscal fourth quarter ending September, similar to the slide the company reported in the third quarter. Sales forecast in 4Q is likely to be below market expectations of flattish growth.

Source: PublicInvest Research - 30 Aug 2023