INARI expects an improvement in 4QFY23 performance as it initiates the production of RF filters for the up-coming US flagship smartphone. However, the same cannot be said for other business segments which are still grappling with order deferments, while contributions from new ventures will not turn meaningful anytime soon. We maintain our forecasts, TP of RM2.46 and MARKET PERFORM call.
We came away from INARI’s post-3QFY23 results briefing with mixed feelings about its prospects. The key takeaways are as follows:
Forecasts. Maintained.
We also maintain our TP of RM2.46 based on 23x FY24F PER, which is in line with peers’ forward mean. Our TP imputes a 5% premium to reflect its 4- star ESG rating as appraised by us (see Page 4).
Investment thesis. We like INARI for: (i) it being the closest proxy to 5G adoption, (ii) it being highly responsive to the market demand with the rollout of new technologies such as double-sided moulding (DSM) and system-on-module (SOM), and (iii) its significant expansion in China, capitalising on the superpower’s aggressive push for semiconductor self-sufficiency. However, we remain cautious due to the waning consumer demand in the smartphone market while its new ventures may not contribute soon enough. Maintain MARKET PERFORM.
Risks to our call include: (i) new offerings not well received by key customers, (ii) new supply-chain disruptions, and (iii) delays in its expansion in China.
Source: Kenanga Research - 29 May 2023
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