Inari Amertron Berhad - Initiation
Tue, 10-Dec-2024 07:23 am
by Jayden Tan • Apex Research

Counter

INARI (0166)

Target Price (RM)

3.76

Recommendation

Buy

Investment Highlights

 

  • Strong Exposure to 5G and RF Markets. The Group’s assembly & test expertise in Radio Frequency (RF) components positions it well to capitalise onto the growing demand for high-frequency RF solutions driven by the ongoing 5G smartphone upgrade cycle. Additionally, the introduction of AI-powered smartphones by leading US phone manufacturers is expected to spur a new replacement cycle, further supporting RF chip demand in the short to medium term.

     

  • Strategically positioned for AI Market growth and Data Center investments. Inari is well-positioned to benefit from the rapid expansion of the AI market and rising investments in data centers. The Group is scaling up production of 800G fiber optic transceivers for its customers, which are essential for high-speed data transmission and processing within AI backend infrastructure. Additionally, four production lines have been installed at its Penang P34 plant for a new memory US customer, with mass production slated to begin by the end of CY2024.

     

  • JV capitalising on China’s semiconductor self-sufficiency ambitions. Inari is leveraging onto its 54.5%-owned JV - Yiwu Semiconductor International Corporation (YSIC), which commenced operations in recently mid-CY2024, to capitalise on China’s push for semiconductor self-sufficiency and the growth of local smartphone brands. This partnership strategically positions Inari to access the world’s largest consumer electronics market, reinforcing its role in China’s semiconductor ambitions while ensuring sustainable growth and diversification.

     

  • Proxy of Malaysia Technology Beta play with anticipated FY25 upcycle. Inari stands out as a prominent technology beta play in Malaysia, set to benefit from the expected recovery in the technology sector by FY25. A turnaround is projected in FY25, with the World Semiconductor Trade Statistics (WSTS) forecasting a 12.5% growth in global semiconductor sales to USD687.0bn in CY25.

     

  • Valuation & Recommendation. We initiate coverage on Inari Amertron Berhad with a BUY recommendation with a fair value of RM3.76, by ascribing a P/E multiple of 32.0x assigned to FY26F EPS of 11.8 sen, reflecting +1 standard deviation of its 5-year historical forward P/E mean.

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Market Mover
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USD 4.390206 4.425718
EUR 5.008717 5.015095
CNY 0.603029 0.603828
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