Inari’s 9MFY21 net profit surged by 101.3% YoY to RM242.1m, on the back of better contribution from its radio frequency (RF) segment, as the Group had 22 fully operational SiP lines during the quarter. The stellar results came in above both our and consensus’ full-year estimates at 81% and 83% respectively. We still deem our forecasts in line, as 4Q are seasonally weaker, given that there are no new phone releases by the North American phone maker. We make no changes to our estimates at this juncture and we maintain our TP of RM4.40 (based on a PE multiple of 45x) despite rolling over our valuation base year to CY22F, as we take into account the enlarged share base of 3.769bn shares post private placement. We maintain our Outperform recommendation on Inari. On a side note, Inari also announced a third interim dividend of 2.2sen per share and a special dividend of 1.8sen per share, bringing cumulative dividend to date to 8.5sen per share.

• Record 3Q. Inari’s 3QFY21 revenue was up by 41.4% YoY to RM343.9m, owing to stronger contribution from its RF segment. The RF segment achieved stronger sales YoY due to more SiP lines being installed. Note that there were 22 fully operational SiP lines in 3QFY21. In tandem with the growing revenue supported by the RF segment, net profit also jumped by 133.7% YoY to RM81.9m. The stronger net profit was also boosted by the recognition of deferred tax assets, hence the effective tax rate was 8.4ppts lower, at 5.6% during the quarter. Net margins also expanded to 23.9%, from 14.5% in 3QFY20.

• Outlook. Inari is currently developing its electromagnetic interference (EMI) shielding equipment, which is especially important for 5G technology as 5G’s high frequency will lead to an increased level of interference, hence EMI shielding is vital to ensure that the device will not be impacted by external and its own radiated electromagnetic waves. Apart from that, R&D works for the replacement of copper pillar bumping are also underway.

• Maintain Outperform. We make no changes to our earnings forecast at this juncture and we roll over our valuation base year to CY22F. However, our TP remains unchanged at RM4.40 (based on a PE multiple of 45x), as we take into account the enlarged share base of 3.769bn shares post private placement (targeted completion in 2HCY21).

Source: PublicInvest Research - 24 May 2021