Generic segment positively surprised; maintain BUY
Inari posted another set of strong results for 9MFY22, supported by steady
growth for its RF/Opto products, and a surprise beat by its Generic
segment. In line with our recent moderation of the sector’s valuation pegs
(given the Fed’s aggressive monetary tightening), we lower Inari’s to 28x
FY23E PER, at +0.5SD to the LT mean (from 32x FY23 PER, at +1SD). Our
TP is also lowered to MYR3.50 (-11%), but we maintain our BUY
call/forecasts for now. Inari remains our top M’sian OSAT pick, premised
upon its (i) RF division’s sustained resilience, (ii) proven mgmt team, and
(iii) solid fundamentals (net cash pile of c.MYR2b, or 53 sen/share).
Results within expectations
Excluding EIs of MYR1.9m, Inari’s 3QFY22 core net profit came in at
MYR88.6m (+14% YoY, -22% QoQ), bringing cumulative 9MFY22 core
earnings to MYR314.6m (+29% YoY). At 78%/80% of ours/the streets fullyear estimates, the results were largely in-line with expectations, as the
second half of Inari’s FYE-June tends to be seasonally weaker. An interim
dividend of 2.8 sen was also declared (9MFY22: 7.8 sen; 9MFY21: 8.5 sen).
Key takeaways from 3QFY22 results
9MFY22 revenue grew 14% YoY to MYR1.2b, underpinned by segmental
growth across all key products classes (RF/Opto/Generic respectively
contributed 61%/32%/7% to total group turnover). The RF segment (+12%
YoY) remains the group’s key top-line driver, underpinned by stable volume
loading by its key American customer. YTD growth in the optoelectronics
segment was also healthy, at +14% YoY, but the generic segment
outperformed with a strong 32% growth YoY, as demand for legacy
components has unexpectedly picked-up in FY22. Group gross/net profit
margins were also stable at c.30%/25% level, in-line with past guidance.
Resilient but not immune to downside risks
Inari has thus far been resilient and remained relatively insulated from
ongoing supply chain disruptions via its prudent inventory mgmt. However,
slowing Chinese economic growth (as highlighted in our last report [link])
and the Fed’s aggressive monetary tightening poses key downside risks to
its historical valuation premium. As such, we conservatively lower our
valuation peg for Inari to 28x FY23 PER, at +0.5SD to LT mean (from 32x
FY23 PER, at +1SD to Mean). Nonetheless, our BUY call and earnings
assumptions are maintained for now, pending mgmt updates later today