Review

• INARI’s 1HFY24 core profit of RM179.5mn came in within expectations, accounting for 52.0% and 48.8% of ours and consensus full-year estimates.

• A second interim dividend of 2.2sen/share was declared, bringing YTD dividend to 4.4sen/share. (1HFY23: 4.8sen/share)

• YoY, 1HFY24 core profit dropped 11.7% to RM179.5mn, despite revenue was 2.4% higher at RM798.0mn. The weaker bottom line was mainly due to higher electricity rates and losses in work-in-progress items arising from glitches in electricity supply. Meanwhile, the group also suffered from lower gross margin (-7pp YoY) at 23.8%, due to new products launching.

• QoQ, 2QFY24 core profit increased 9.5% to RM93.8mn on higher revenue. The group saw its revenue jump 7.9% to RMRM414.1mn due to higher loading volume in radio frequency and optoelectronics segments.

• Meanwhile, INARI maintained a robust balance sheet with a net cash position of RM1,830.0mn as at end-2QFY24.

Impact

• Maintain FY24 to FY26 earnings forecasts.

Outlook

• Going forward, we expect INARI to see sequential earnings improvement, alongside an anticipated recovery in the global demand for semiconductor.

Valuation & Recommendation

• Target price is maintained at RM3.55, based on unchanged 33xCY24 earnings. Reiterate Buy on INARI.

Source: TA Research - 27 Feb 2024