• Overview. Inari’s 2QFY22 core profit rose 15% yoy to RM108m from RM94m mainly due to higher sales across all business segments, especially for its high-value and high-margin products (RF products) which saw EBITDA margin expanded 0.4ppts to 33% from 32.6%.

• Key highlights. On qoq basis, revenue fell 3% to RM420m due to lower volume loadings for Opto products. However, core profit still recorded a slightly improvement on the back of lower tax expenses and higher interest income.

• Against estimates: inline. Inari’s 6MFY22 core profit increased 30% yoy to RM214m from RM165m on the back of stronger contribution from all business segments, higher interest income from fund placement, and favourable forex exchange rates. Overall, 6MFY22 core profit was broadly inline with ours and consensus’ estimate at 48% and 54% respectively.

• Dividend. Inari declared second interim DPS of 2.8 sen (2QFY21: 2.5 sen), implying a dividend payout of 96%. This brings 6MFY22 DPS of 5.6 sen, 24% higher than 6MFY21 DPS of 4.5 sen.

• Our call. Maintain BUY at TP of RM4.85, pegged at 40x PER on FY22 EPS of 12 sen. We opine a 20% decline in Inari YTD’s share price is due to negative sentiment on the tech sector overall. We believe its huge business potential within RF segment especially with the onset of 5G technology will provide sustainable long-term earnings growth to the company. Thus, we see Inari’s current price level as an attractive buying opportunity for investors.

Source: BIMB Securities Research - 21 Feb 2022