• Inari Amertron Berhad (Inari) has made significant progress in  sustainability journey since 2017. Inari's sustainability efforts have been  recognized following its inclusion in the FTSE4Good Bursa Malaysia Index  (F4FBM) since June 2020 and remained in the index with a ‘4-star’ rating in  December 2022.

• Given Inari’s nature of business within the manufacturing industry, we foresee more efforts and initiatives being put in place that will reflect its  full commitment towards environmental aspects and to address climate  change issues with the aim of reducing carbon footprints. This includes elevating the material importance of 'Greenhouse Gas Emissions' (GHG)  and 'Water Management' elements to the level of 'Material' sustainability  matters in FY22 as well as establishing a short-term and long-term goals aimed at improving energy efficiency, reducing GHG intensity, minimizing  water consumption and waster generations.

• We have assigned Inari an overall ESG rating of 4.3 out of 5 which falls in  the rating band of “Best”.

• Maintain a BUY call on Inari with a TP of RM3.75 for now. Note that we are  in the midst of revising our earnings assumptions and TP which are  expected to be finalised post financial results announcement.  Nonetheless, we are less sanguine on Inari’s FY23 outlook due to unexpected slowdown in global smartphone sales which may affect its  radio frequency (RF) segment, its biggest contributor to revenue

Sustainability Journey Started Back in 2017

Inari Amertron Berhad (Inari) embarked its sustainability journey back in 2017 (Chart 1) through the establishment of a Sustainability Working Committee  which was later redesigned as the Sustainability and Integrity Working Group  (SIWG). The SIWG has been responsible for the mapping of sustainability  matters with the United Nations Sustainable Development Goals and ensuring  compliance with Global Reporting Initiative Standards. The company's  sustainability efforts have been recognized which underpinned its inclusion in  the FTSE4Good Bursa Malaysia Index (F4FBM) on 22 June 2020. It remained in  the list with a ‘4-Star’ rating as of December 2022, a testament to its  commitment towards ESG initiatives. Inari further strengthened its  sustainability journey in 2021 after incorporating the Paris Agreement 2015  into its Sustainability Policy, which aims to reduce the global warming and  achieve a Net Zero carbon emissions by 2050. Overall, Inari's sustainability  strategy and initiatives reflect its strong commitment towards environmental  responsibility.

Inari's Sustainability Priorities in Response to Concern on Climate Change

In our review, we noticed that Inari has elevated the material importance of  'Greenhouse Gas Emissions' and 'Water Management' to the level of 'Material'  sustainability matters in FY22 (Figure 1). This change reflects Inari's continuous  commitment to address urgent issue of climate change given the nature of its  business within the manufacturing that may have negative impact on the  environment. We commend Inari for this and encourage the company to  continue with its efforts to enhance its sustainability practices and reduce its  carbon footprint.

A Fruitful Environmental Strategy Adopted

It is worth noting that Inari has successfully achieved lower energy intensity, GHG emission  intensity, and water intensity over past three years despite an increase in production  volume. These achievements are attributable to Inari’s effective sustainability initiatives  which aim to reduce global warming, Net Zero carbon emission by year 2050 and zero non-compliance with local regulatory requirements for wastewater discharge

Source: BIMB Securities Research - 12 May 2023