Kenanga Research has maintained an “Outperform” recommendation For Inari Amerton Bhd with an adjusted Target Price of RM4.60 (previously RM4.80) to reflect the enlarged share base on ESOS conversion in late-Jan 2022.
It said that its valuation is based on CY22E PER of 40x (+2SD to its 3-year mean), justified by a super up-cycle driven by 5G.
On its financial results, Kenanga said that Inari logged yet another new record quarterly earnings in 2QFY22 with CNP of RM108.1m (+2.4%) despite registering a slightly lower revenue by 2.5% to RM420.3million due to lower loading volume from the optoelectronics business segment which is likely attributable to the on-going chip shortage impacting the automotive sector.
It said that thankfully, having good oversight with regards to resource allocation and cost control helped the group maintain a strong margin as 2QFY22 saw another 1.2ppt increase in NPM to 25.7%. YoY, 2QFY22 CNP grew 14.8% on an 11.5% increase in revenue.
Cumulatively, 1HFY22 registered a 17.5% growth in revenue to RM851.4m while CNP grew at a larger quantum of 29.6% to RM213.6 million.
The stockbroking firm said that the strong performance by Inari can be attributed to the elevated demand for the US smartphone that was launched in September 2021.
It said that based on the earnings transcript of the US smartphone manufacturer, the demand came from both existing users upgrading their smartphone as well as new users switching over from another mobile operating system.
Kenanga said that looking to expand beyond its dominance in the radio frequency (RF) space, it is is currently engaged in new ventures and products such as automotive power modules (system-on-module) and optical transceivers for data centres.
