We attended Inari Amertron (Inari) analyst briefing last week and came away feeling upbeat on its outlook. Despite the challenging financial results in 3Q, management believes it could make a strong comeback in the subsequent quarters on the back of new flagship smartphone that is going to be launched by its end-customer in Sept, which will drive its radio frequency (RF) segment higher. The group is seeing a higher allocation from its key customer with a 15% increase in RF filter components per smartphone. Retain Outperform call with an unchanged TP of RM3.53 based on 34x FY24 EPS.
- 3QFY23 results round-up. During the quarter, RF sales made up 52%, followed by Optoelectronics, 39% and generic, 9%. The weaker sales of RM275.8m, down 23.4%, was mainly dragged by lower loading volume across all business segments. Notably, RF sales dipped 32.3% YoY to RM142.9m. Optoelectronics dropped 13.3% to RM107.1m while generic sales remained steady at RM25.8m. EBITDA margin slipped from 36.6% to 32%. For the 9MFY23, smartphone segment continued to be the largest sales contributor, making up 62% followed by Datacom (14%), automotive (11%), industrial (7%) and generic (6%).
- Progress update on the new plant in China. The 54.5%-owned Yiwu Semiconductor International Corp’s plant is on track for completion in 2H 2023, with the first production line set up and customer audit by Sept 2023. As of now, it has recruited more than 30 headcounts, including scientists for the respective department. It mainly provides premium OSAT services for the Chinese customers. Upon full commercial operation, it could potentially generate up to RMB1bn (RM652m) sales.
- Slow but gradual recovery for data communication segment. The optical communication business, which contributed 14% to the group sales, remains soft due to slow deployment of high-speed products (100G-400G). Management expects to see gradual recovery in the 2H 2023.
- New opportunity. The group is in the midst of setting up production lines for its new customer in the memory segment, which will be completed by Aug 2023. Meanwhile, the production of high-powered LEDs for another new customer is on track. On more positive news, it is currently in early discussion with the parent company of this existing high power LED customer, who is looking at the possibility of placing orders for silicon carbide (SiC) related LEDs and power modules.
Source: PublicInvest Research - 30 May 2023