KUALA LUMPUR (Aug 28): Shares of Inari Amertron Bhd (KL:INARI) fell on Wednesday to their lowest in more than three months following the semiconductor company’s weak results though analysts still expect better days ahead.

Inari fell as much as 9% or 31 sen to RM3.06. The stock ended the day at RM3.10, its lowest close since May 14, 2024, after more than 24.7 million shares changed hands. At the last price, the company has a market capitalisation of RM11.73 billion.

At least six research houses cut their target prices as Inari's net profit for the financial year ended June 30, 2024 (FY2024) made up only 93% of the street’s estimate. Still, analysts are betting on the company that forms part of the Apple Inc’s supply chain and its exposure to artificial intelligence (AI).

“Inari remains one of our preferred picks in the Malaysian technology sector due to its attractive risk-reward potential, exposure to AI infrastructure spending growth, and strong earnings quality and track record,” said CIMB Securities.

The research house maintained its ‘buy’ call on the stock even as it cut its target price to RM3.90 from RM4.50 after slashing its earnings forecast by 10%-14% for the next two financial years to account for the strengthening ringgit.

Inari’s shares have declined some 23% from this year’s peak on July 11, tracking the decline in the technology sector as frenzy over AI and industry upcycle fizzled. The Bursa Malaysia Technology Index, which tracks 49 stocks in the sector, has also given up most of its recent gains.

Still, a majority of 12 out of 20 analysts recommend ‘buy’ on Inari while eight has ‘hold’ calls, and the stock has no ‘sell’ rating. The consensus 12-month target price is now RM3.85 following the latest cuts, according to Bloomberg, implying a potential gain of 24% from its last price.

For Hong Leong Investment Bank, which has a ‘hold’ call on Inari, the “risk and reward profile is balanced at current juncture” even as the research house “strongly believes that AI-capable iPhone will be another super cycle”.

Further, Inari is also well positioned to benefit from the growth of high bandwidth networking optoelectronic devices serving the AI data centre market, the research house said.

MIDF Amanah Investment, meanwhile, flagged potential acquisition from Inari's consistently robust cash reserves. The company’s cash hoard has also been rising steadily, and surged 24% to RM2.3 billion at the end of FY2024.

A larger cash reserve typically indicates a higher likelihood of acquisitions in the near term, as the company may need to pay out a higher dividend otherwise, the research house added.