A US smartphone maker has raised production volume by 20% in anticipation of stronger demand for its upcoming model which will likely offer a high refresh rate display offering a whole new user experience never seen before. This innovation is strategically set to gain more market share as a Korean competitor is skipping the launch of its own flagship device this August in favour of a foldable phone series. BUY with a Target Price of RM4.60 based on FY22E PER of 40x, justified by a super technology cycle driven by 5G and prospects from potential new customers/M&A which are not priced-in by the market yet.

Recognising the current chip shortage environment, Inari has kick started the US smartphone program 1-2 months ahead of typical schedule to ensure meeting the timeline of its key customer’s annual launch event in September. The US smartphone company has reportedly informed suppliers to increase production volume by 20%, suggesting strong confidence of its upcoming 2021 flagship device.

We observed that a Korean smartphone manufacturer is likely to skip the launch of its flagship device in August in favour of its foldable phone series. This opens up a window of opportunity for the US smartphone maker to fill the void and gain market share from the Korean competitor.

From our channel checks, we believe that the upcoming US smartphone may potentially sport a high refresh rate display of up to 120Hz with always-on function, which will be the biggest highlight among the new features offered this year. Having the first high refresh rate OLED display in its product line up would introduce a whole new immersive experience when interacting with the device.

Inari has already established a strong presence in the RF front-end segment (c. 70% of group revenue) and will continue to experience robust demand as the adoption of 5G among consumers has only begun. Meanwhile, the group is already preparing for the next phase of growth from data centre expansions by increasing its exposure into optical transceivers, memory and power modules.

Source: Rakuten Research - 26 Jul 2021