Inari Amertron Berhad - Dragged by optoelectronics
Fri, 21-Feb-2025 07:16 am
by Jayden Tan • Apex Research

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INARI (0166)

Target Price (RM)

3.530

Recommendation

Buy

Summary

  • Inari’s 2QFY25 CNP dropped -33.9% yoy and -19.6% qoq to RM62.0m, bringing 6MFY25 CNP to RM139.1m (-22.6% yoy), came below expectations at 36% of our forecast of RM388.0m and 42% of consensus RM333.0m, due to lower volume loading in Optoelectronic products.

  • Slashed FY25F CNP by -25% to RM290.9m, factoring in weaker optoelectronic volume loading. FY26F/FY27F forecasts remain unchanged.

  • Maintain BUY with an unchanged TP of RM3.53, based on 30.0x P/E on FY26F EPS of 11.8 sen, reflecting confidence in Inari’s value chain climb and advanced packaging expansion. Near-term volume headwinds persist, but long-term prospects remain strong.

 

Results missed expectations. 6MFY25 core net profit (CNP) of RM139.1m (-22.6% yoy), after excluding forex impact, came in below expectations – accounting for just 36% of our RM388m forecast and 42% of the consensus estimate of RM333m. The shortfall was primarily due to lower volume loading from Optoelectronic products.

 

YoY. Excluding RM28m in forex gains, 2QFY25 CNP dropped 33.9% yoy to RM62m, weighed down by lower volume loading in Optoelectronic products—particularly fibre optics. Customers are shifting focus from 400G to the next-generation 800G standard, and Inari is currently building capacity to meet 800G demand. Revenue fell 15.7% yoy to RM349m.

 

QoQ. CNP declined 19.6% qoq due to the declining of 400G product deliveries as project ending and shifting focus to 800G, while revenue slipped 10.1% qoq.

 

Dividend. A dividend of 2 sen/share was declared, payable on 28 March 2025.

 

Outlook. Radio frequency volume was flattish as expected, due to lacklustre end-product sales. In the optoelectronic segment, volume loading is likely to remain low until new 800G capacity becomes operational in the Philippines sometime in June CY25. We favour in Inari’s effort to climb the value chain through new products and advancements in advance packaging technology.

 

Earnings Revision. Given the weaker-than-expected results under reviewed, we have slashed our FY25F earnings forecast by 25% to RM290.9m to factor in softer optoelectronic volume loading. Our FY26F and FY27F forecasts remain unchanged.

 

Valuation. We reiterate our BUY recommendation on Inari with a target price of RM3.53, based on a 30.0x P/E multiple applied to FY26f EPS of 11.8 sen and a 0% ESG premium/discount, reflecting its three-star ESG rating.

 

Risk. Lingering tariff threats under the Trump administration could introduce uncertainty in customer demand and business volume.

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