Notably, Inari’s core radio frequency (RF) segment accounted for 59% to 60% of the group’s revenue from FY2021 to FY2023, according to the research house in its note on Wednesday (Jan 3).

TA Securities predicts Inari’s RF segment to continue to benefit from the increasing demand for greater RF content per smartphone, to support a broader array of frequency bands.

Additionally, it said the RF segment will benefit from the ongoing 5G smartphone upgrade cycle, with the global proportion of 5G smartphone shipments predicted to rise from 61% in 2023 to 83% by 2027.

TA Securities noted that the RF segment’s utilisation rate was guided to have improved from about 80% in 1QFY2024 (3QCY2023) to more than 90% in 2QFY2024 (4QCY2023), as it overcame the temporary setback to production yield from the unexpected power disruption.

“As such, we project Inari’s 2QFY2024 earnings to be sequentially stronger, within the range of RM101 million to RM105 million (versus 1QFY2024’s of RM86 million),” it said.

TA Securities said Inari has successfully gained momentum in new projects, with a revenue contribution of approximately RM150 million (around 10% of the research house’s revenue forecast), anchored by memory and optic transceiver products.

“Other ongoing projects include high-power LED (for billboard, stage lighting, curing, horticulture, etc) and system-on modules (power management module for high-power server and industrial application).

“Meanwhile, Inari also remains in talks with four strategic customers with products relating to electric vehicle charging, smartwatches, advanced optical inspection, and power management modules for data centres,” it added.

The China JV progress also contributed to TA Securities’ positive outlook on Inari.

Shortly after completion of its new plant in Yiwu, China at the end of 2023, Inari’s 54.5%-owned Yiwu Semiconductor International Corporation (YSIC) kick-started operations with maiden contributions from a new customer with products relating to smartphone applications, it said.

“Looking ahead, backed by its Chinese partner China Fortune-Tech Capital Co Ltd (CFTC), we expect YSIC to benefit from ongoing efforts by Chinese semiconductor players to accelerate the localisation of their supply chain amid the US-China trade tensions,” it added.

With a brighter view of Inari’s growth prospects, TA Securities maintains its earnings estimates on Inari and reiterates a “buy” call with an unchanged target price of RM3.55.

Key downside risks to the call include geopolitical tensions weighing on economic growth and disrupting supply chains, the weakening of the US dollar against the ringgit, surge in commodity prices, and material shortages, it said.

At the time of writing, Inari was trading down one sen or 0.33% to RM3 per share, translating into a market capitalisation of RM11.2 billion.