• Maintain BUY (TP: RM4.45). Inari Amertron Berhad (Inari) reported a revenue of RM333.1mn in 4QFY24, marking a +11.5% YoY increase from RM298.8mn, thanks to the higher sales volumes from the RF and optoelectronics segments. However, core PATAMI fell by -9.4% YoY to RM58.9mn due to unfavourable forex, higher operating costs, and early product staging. On a QoQ basis, both revenue and PATAMI for 4QFY24 declined by -4.2% and -17.6% respectively, due to lower sales volume from the RF and optoelectronics segments, unfavourable forex, and lower margin product mix. We are maintaining our BUY call with an unchanged target price (TP) of RM4.45 for now, pending further details from the management. Our TP pegged at 34x PER (+1 SD above average of 3-year historical forward PER) to FY25F EPS of 13.1sen.

• Key Highlights. For FY24, core PATAMI declined marginally by 4.4% YoY to RM306mn, despite a higher revenue of 9.2% YoY. The decline was due to forex losses, higher costs, and temporary lower margins from new product launches. Inari’s FY24 core PATAMI fell short of both our and Bloomberg consensus’ estimates, at 90% of full-year forecasts. Nevertheless, Inari declared its fourth interim DPS of 1.4sen, bringing the total FY24 declared dividend to 7.7sen per share (FY23: 8.2sen), translating to a 2.3% yield at the current share price.

• Earnings Revision. No change to earnings forecast, pending results briefing.

• Outlook. Despite the expectation of prolonged unfavourable forex, we remain confident in Inari’s prospects as demand for its RF and edge-AI related products is expected to stay robust, mitigating the risks. We continue to like the company for i) its product diversification, ii) being a proxy to a greater global 5G deployment, and iii) being a beneficiary of the China’s market recovery. Although margins have declined in recent quarters, we believe that Inari is investing for greater future returns. Notably, the company has consistently maintained a resilient EBITDA margin of above 20% over the last 7 years (refer to chart 1).

Source: BIMB Securities Research - 28 Aug 2024