- Overview. Inari Amerton Berhad (Inari) reported a weaker 1Q23’s core profit of RM100.5mn that was down by 4.8% YoY due to lower volume loadings across its business segment. This was dragged by soft demand for consumer electronics globally, especially for smartphones given global inflationary pressure and China zero COVID-19 policy. Notwithstanding that, core profit improved by 17.2% QoQ in tandem with higher revenue (+12.1%), favourable forex movement, and lower deferred taxation.
- Key highlights. Though Inari reported a 12.6% decline in revenue from the corresponding quarter, EBITDA margin climbed 3.1 ppts to 35.3% continuing its highest level of EBITDA margin in 4QFY22. Against estimates: Inline. Inari’s 3Q23 core profit was broadly in line with ours and consensus’ estimates at 22% and 23%.
- Dividend. A first interim DPS of 2.6 sen was declared (1QFY22: 2.8 sen) implying a dividend payout of 96%.
- Outlook. We remain upbeat on Inari FY23’s business outlook as we expect a recovery in global smartphone sales in 2023 (+5.2%), consistent with the projection by International Data Corporation (IDC). Added with surging 5G smartphones migration will provide attractive earnings prospects for Inari’s RF business.
- Our call. Maintain our BUY call on the stock with a TP of RM3.75, pegged at 30x PER on FY23 EPS of 12.5 sen.
Source: BIMB Securities Research - 21 Nov 2022