Excluding i) net forex loss (RM53.3m), ii)), allowance for slow-moving inventories (RM3.6m) and minority interests, Inari Amertron (Inari) kick-started 1QFY25 with a core net profit of RM81m, down 1.5% YoY, due to lower gross margin. Despite this, the results were aligned with both our and the street's full-year expectations, coming in at 21.9% and 20.4%, respectively. Maintain Outperform call with an unchanged TP of RM4.21 based on 37x FY26 EPS. A first DPS of 1sen (vs 1QFY24: 2.2sen) was declared for the quarter.

• 1QFY25 topline climbed 1.1% YoY. During the quarter, Inari's revenue rose from RM383.9m to RM388m, underpinned by higher loading volume from radio frequency and generic segments. The radio frequency segment remained the biggest sales contributor at 65%, followed by optoelectronics (28%) and generic (7%). In terms of industry application, the smartphone segment also remained the largest sales contributor, making up 66%, followed by datacom (14%), automotive (9%), industrial (6%) and Generic (5%).
• Core earnings slipped to RM81m. Stripping out the exceptional items, 1QFY25 core earnings contracted from RM82.2m to RM81m, mainly due to the start-up costs for the memory module as it enters the high-volume manufacturing stage following the successful installation of 4 production lines. In addition, the weaker results were also caused by higher depreciation (20.6% YoY) following the commercial operations of the new plant in Yiwu, China. Meanwhile, gross margin narrowed from 24% to 21.5%.
• Apple iPhone sales volume claimed the second spot in 3Q 2024. During the third quarter of 2024, Apple enjoyed a 3.5% YoY growth in shipments, driven by strong demand from the previous models and the launch of the new iPhone 16 lineup. Older iPhone models, specifically the iPhone 15, performed exceptionally well due to the aggressive promotions and the introduction of Apple Intelligence features. In China, the strong iPhone 16 sales had pushed Apple to the second spot in the 3Q 2024 smartphone shipments, after it had fallen out of the top 5 in the previous 3 months. iPhone shipments captured 15.6% market share in the world's largest smartphone market. Going forward, Apple iPhone sales momentum is expected to extend to the final quarter as more customers are upgrading from the prior models to a new AI-enabled smartphone.

Source: PublicInvest Research - 28 Nov 2024