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Research houses positive on Inari after Q3 2022 results

17/05/2022 12:09 PM

KUALA LUMPUR, May 17 (Bernama) -- Research houses maintained their positive stance on Inari Amertron Bhd following the announcement of its third quarter ended March 31, 2022 (Q3 2022) results.

Inari’s net profit for the Q3 2022 rose 10.2 per cent to RM90.48 million from RM81.95 million in the same quarter last year while revenue increased 5.1 per cent to RM360.34 million, with growth recorded in all business segments.

In a research note today, RHB Research maintained its ‘buy’ call on Inari with a 40 per cent higher target price (TP) of RM3.59 per share.

The research house said Inari’s earning were in line and on track to hit another record year, supported by higher loading and margin expansion amid higher operating leverage and favourable foreign exchange (FX).

“While Inari may be excluded from the Kuala Lumpur Composite Index (KLCI) in May as share price tumbled 36 per cent year-to-date to below its five-year mean, we stay positive on its prevailing growth catalysts from 5G smartphone proliferation and new China venture,” it noted.

Kenanga Research maintained its ‘outperform’ call on Inari with a lower TP of RM3.30 from previously RM4.60 per share.

“We lowered our price earnings ratio to account for Inari’s potential deletion from the KLCI index in the upcoming June review and the slowing demand in the smartphone market. However, we believe the slight premium to its five-year mean is justifiable by the group’s superior profit margins compared to peers,” it said.

In another note, MIDF Research maintained its ‘buy’ stance in Inari with unchanged TP of RM4.55.

The research house viewed that the increase in Inari's earnings was mainly contributed by higher cumulative revenue of RM1,211.7 million (+13.5 per cent year-on-year) as volume loadings remain solid, additional interest income from fund placement and favourable FX rates.

“Despite the heavily dampened situation of COVID-19 lockdown in China and the still ongoing conflict in Ukraine, we opined that the group’s volume loadings will continue to grow momentously, especially from the radio frequency (RF) segment as it is highly needed in 5G technology adoption.

“Operationally, we also expect profit margin to improve, arising from various measures to control costs and capital expenditure,” MIDF said.

Echoing the other research houses, CGS-CIMB also reiterated its ‘add’ call on Inari with a lower TP of RM3.40 with a projection of a stronger sales and net price growth in second half of 2022, driven by higher RF volume for new flagship smartphones and a recovery in China operations.

The research house projected Inari’s flattish to marginally higher quarter-on quarter qoq sales, driven by RF in 4Q 2022. However, this will be partially offset by lower sales from Amertron Technology Kunshan, following the extended lockdown in China and ongoing wafer shortages for Generic IC packages.

It also expects higher Inari to incur higher operation expenditure in view of higher labour costs following the implementation of a new minimum wage policy of RM1,500 per month in May this year.

“Nevertheless, we still expect a strong pick-up in utilisation from July 2022 onwards in view of the ramp-up in assembly and test production for RF chips going into next generation 5G smartphones for a North American smartphone maker.

“While near-term market volatility and weak sentiment for the technology sector could be a drag on the stock, we still like Inari as a proxy for 5G network proliferation,” it added.

At 11.35 am, the company shares rose four sen to RM2.60 with 6.9 million shares transacted.



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