Inari Amertron faces near-term headwinds

Malaysian Reserve

26-05-2025

INARI Amertron Bhd is facing near-term headwinds as the semiconductor support player is seen punching below market expectations.
For the third quarter ended March 31, 2025 (3Q25), its net profit plunged 24.8% quarter-on-quarter (QoQ) to RM55.5 million on a revenue of RM308.3 million, down 11.3% compared to the same period.
'Long-term prospects remain intact with efforts to tap into advanced packaging markets, but near-term headwinds and volatile geopolitical trade dynamics justify a more conservative stance,' BIMB Securities Sdn Bhd said in a note released last week.
It has a 'Hold' call on the company's counter with a 52-week target price (TP) of RM2.23. Inari Amertron has 12 'Buy', eight 'Hold' and two 'Sell' calls among the analysts tracked by Bloomberg, with a consensus TP of RM2.24.
OSAT Provider
The semiconductor company operates in the outsourced semiconductor assembly and test (OSAT) and electronics manufacturing (EM) segments. It is the largest semiconductor player in Malaysia and a key OSAT provider for Broadcom's rapidly thriving wireless division.
In an exchange filing on May 20, Inari Amertron reported its net profit for the first nine months ended March 31, 2025 (9M25), fell 30.9% to RM169.6 million, on revenue of RM1.04 billion, which was down 11.3%.
It said the decline in revenue was mainly due to comparatively lower product volume loading across all business segments and changes in the product mix.
The lower profit was attributed to reduced volume loading, unfavourable foreign exchange (forex) movements and a start-up loss of RM15.7 million at its China subsidiary during the period. Excluding the losses from the China subsidiary, the profit decline would have been 27%.
Commenting on the results, BIMB Securities said it has maintained its cautious stance, as volume recovery has yet to materialise amid continued softness in the smartphone and industrial segments, which still account for a significant portion of Inari Amertron's portfolio.
While data communications are showing early signs of growth, the company's limited exposure to artificial intelligence (AI) and advanced packaging technologies restricts its ability to capitalise on selective tailwinds in the sector. Although Inari Amertron continues to scale its China operations and explore strategic partnerships, contributions from these initiatives remain negligible in the near term, it said.
Kenanga Research Lowers Inari Amertron Outlook
The counter was downgraded to 'Market Perform' from 'Outperform' by Kenanga Investment Bank Bhd (Kenanga Research), with a lower TP to RM2, down from RM2.39.
The research house said Inari Amertron's 9M25 results came in below expectations, primarily due to weaker demand in its radio frequency (RF) and opto-electronics segments.
'Post-US Liberation Day, it is becoming evident to us that margin pressures are likely to persist amid ongoing forex volatility and uncertainties stemming from US-China tariff war. Incorporating a more cautious outlook, we trim FY25F/FY26F earnings forecasts by 8%/16%,' it said.
On the company's outlook, Kenanga Research said Inari Amertron anticipates selective growth in the semiconductor industry, driven by the accelerating adoption of generative AI across various sectors.
The group also expects robust performance from the data communications sector — which contributed approximately 14% of 9M25 revenue — while demand for smartphones (which made up 68% of sales) and other semiconductor products is likely to remain subdued.
'Margin pressures are expected to persist, stemming from forex volatility and ongoing US-China tariff negotiations, which continue to disrupt supply chains and inflate cost structures,' added the report.
Meanwhile, Apex Securities Sdn Bhd has maintained its 'Buy' call on Inari Amertron but lowered its TP to RM2.94 from RM3.53 following an earnings revision.
'We expect RF volume to see some upticks in the 4Q25, 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,' it said.
Maybank Investment Bank Bhd (Maybank IB) has retained its 'Hold' call and TP of RM2, noting it was encouraged by Inari Amertron's management team's ability to manage cost efficiently and maintain operating margins despite a high fixed-cost base.
CIMB Securities Sdn Bhd also retained its 'Buy' call with a TP of RM2.
'We believe the US tariff exemption for smartphones will help mitigate pricing pressures, thereby supporting stable RF volume loadings for Inari Amertron.
'At the same time, we remain cautiously optimistic that new programme ramp-ups will begin contributing meaningfully to revenue in FY26F.'
The research house said potential catalysts for the stock include higher contribution from new programmes, a stronger-than-expected recovery smartphone demand, new customer acquisitions driven by trade diversion from North Asia, earnings-accretive acquisitions, favourable incentives from the Malaysian government through the implementation of the National Semiconductor Strategy and higher dividend payouts.
Public Investment Bank Bhd (PublicInvest) has maintained its 'Outperform' call but lowered Inari Amertron's TP to RM2.30, down from RM2.46.
Despite flattish growth in the smartphone segment and weaker momentum in the industrial segment, the report said Inari Amertron is expected to deliver strong growth in data communications segment.
Inari Amertron closed at RM1.87 on May 21, valuing the company at RM7.09 billion. Its 52-week high/low was RM4.02/RM1.42 respectively. — TMR
This article first appeared in The Malaysian Reserve weekly print edition