Inari’s FY21 full year net profit grew by 112% YoY to a new record high of RM330.5m. The results came in above both our and consensus projections at 110% and 107% respectively. Discrepancy in our forecast was mainly due to lower-than-expected cost of sales, of which we reckon was a result of stronger volume loading and better economies of scale. We raise our earnings forecast for FY22-23F by <6%, to account for better contribution from its RF segment, given that the US smartphone maker was reported to have requested its suppliers to boost output for its next-generation models. Our TP is subsequently raised to RM4.75, implying a PE multiple of 45x on its CY22F EPS of 10.6sen. Our Outperform rating on Inari is maintained, as we continue to like Inari for its role as a proxy for stronger 5G adoption globally and is bound to benefit from the US smartphone’s supercycle. Inari announced a final dividend of 2.5sen per share, bringing cumulative dividend for FY21 to date to 11sen per share.

• Stronger-than-expected 4Q. Inari’s 4QFY21 revenue grew by 55% YoY to RM361.3m, due to growth across all business segments. Its RF segment remained the Group’s strongest contributor, supported by higher number of SiP lines in operation and also stronger volume loading of RF products. Net profit jumped 149% YoY to RM88.4m, given EBIT margin expansion of 11.1ppts YoY, due to economies of scale.

• Bright outlook. The ongoing chip shortage may lead to the Korean smartphone maker potentially cancelling the launch of one of its premium flagship models. We believe the cancellation will bode well for the sales of the US smartphone makers’ upcoming release, indirectly benefiting Inari. The US smartphone maker was also reported to have asked its suppliers to ramp up production for its next release by 20%, signifying its confidence on the launch of the new lineup.

• Keeping our Outperform call. We raise our earnings forecast for FY22- 23F by <6%, to account for stronger contribution from its RF segment, considering that the US smartphone maker has requested its suppliers to boost production output for its next-generation model by 20%. Our TP is subsequently raised to RM4.75, representing a PE multiple of 45x on its CY22F EPS of 10.6sen per share. Maintain Outperform.

Source: PublicInvest Research - 9 Aug 2021