Inari Amertron Berhad - 3QFY25 Missed Expectations
Wed, 21-May-2025 07:37 am
by Jayden Tan • Apex Research

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INARI (0166)

Target Price (RM)

2.94

Recommendation

Buy

  • Inari reported 9MFY25 core net profit of RM191.6m (-21.6% yoy) came below expectations, accounting for 66% of our and 68% of consensus full-year forecasts, mainly due to unfavourable USD/MYR forex translation and slower-than-expected performance in China.

  • Trimmed FY25F/FY26F earnings by -8%/-16% to RM267m/RM367.9m, to reflect softer contributions from China and weaker visibility for RF and automotive product sales.

  • Maintain BUY with a lower TP of RM2.94 (from RM3.53), based on 30x FY26F EPS of 11.8 sen, following the earnings revision.

 

Results missed expectations. 9MFY25 core net profit (CNP) of RM191.6m (-21.6% yoy), after excluding minor non-core items, came below expectations, accounting for only 66% and 68% of our in-house and consensus full-year forecasts, respectively. The shortfall was primarily due to an unfavourable USD/MYR forex translation rate and slower-than-expected performance in China.

 

YoY. 3QFY25 CNP came in at RM52.5m, down 18.9% yoy, mainly due to the weaker forex translation, with an average USD/MYR rate of 4.72 during the quarter compared to 4.45 in the same period last year. Revenue was also dragged by lower volume loading from optoelectronic and automotive products. Additionally, the China subsidiary recorded a loss of RM5.0m, attributed to start-up costs from its recent expansion prior to achieving operational scale. On a like-for-like forex basis, smartphone/RF volume loading remained flattish. Overall, revenue declined 11.3% yoy.

 

QoQ. CNP fell 15.3% qoq, mainly due to a seasonally high base in 2Q25, which typically sees higher RF/smartphone product loading from customers. Meanwhile, Datacom products remained weak, as customers continued winding down 400G product deliveries and shifted focus toward 800G. Overall, revenue declined 11.7% qoq.

 

Dividend. A dividend of 1.3 sen per share was declared, payable on 8 July 2025.

 

Outlook. We expect RF volume to see some upticks in 4QFY25, supported by front-loading and rush buying of end-product smartphones during the 90-day trade truce window. However, the longer-term outlook remains clouded, with limited visibility for RF and automotive-related demand due to ongoing tariff uncertainties. Additionally, we remain cautious on the demand of AI-integrated smartphone, as current features lack strong consumer pull to spark a meaningful replacement cycle. That said, we are optimistic on the Datacom segment, which is expected to see robust growth in FY26, supported by the commercial ramp-up of 800G capacity in the Philippines (targeted for June CY25) and the continued strong demand for data centres.

 

Earnings Revision. Given the weaker-than-expected performance, we have lowered our FY25F and FY26F earnings forecasts by 8% and 16% to RM267m and RM367.9m respectively, to reflect slower-than-expected China contributions and revised RF segment sales assumptions amid a clouded demand outlook. Our FY27F forecast remains unchanged.

 

Valuation. We reiterate our BUY recommendation on Inari with a lower target price of RM2.94 (from RM3.53) post earnings revision, based on a 30x P/E multiple applied to FY26F EPS of 11.8 sen, with a 0% ESG premium/discount, reflecting its three-star ESG rating.

 

Risk. Key risk remains the lingering tariff threats under the Trump administration, which may introduce demand volatility and uncertainty in customer order volumes.

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