Inari Amertron faces near-term headwinds
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
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
BusinessToday
3 hours ago
- BusinessToday
Ringgit Decline Amid Middle East Tension, To Remain Rangebound
The local currency experienced a weakening trend this week, slipping past the 4.26 per US Dollar (USD) mark on Thursday. This decline was primarily driven by escalating tensions in the Middle East and growing speculation regarding potential US involvement in the conflict, dominating market sentiment. While the Ringgit held steady early in the week, the surge in geopolitical risk saw Brent crude oil prices climb to USD78.9 per barrel. Typically, higher oil prices tend to bolster the greenback. However, according to market analysts, persistent concerns over the US's fiscal health have tempered the USD's gains, preventing a stronger appreciation. This week, the US Dollar's performance was notably more responsive to geopolitical headlines than to macroeconomic indicators. Weaker-than-expected US retail sales figures, the Federal Reserve's increasingly 'stagflationary' guidance, and foreign selling of US Treasuries had limited impact on the greenback's movement, as investors prioritized safe-haven assets amidst global uncertainty. With a light data calendar expected, geopolitical developments are set to remain the central focus for currency markets. The USD is anticipated to outperform the Euro (EUR) in this risk-off environment. Remarks by President Donald Trump, suggesting a decision on US military participation could come within two weeks, further amplified market unease. While elevated oil prices have temporarily boosted the USD's safe-haven appeal, long-term structural fiscal concerns, particularly rising US debt, may exert downward pressure on the currency over the longer term. Analysts at Kenanga Research expect rising geopolitical tensions and ongoing tariff uncertainty to continue providing support for the USD, which will likely exert pressure on emerging market (EM) currencies, including the Ringgit. The Ringgit is projected to trade within the 4.24 – 4.27 per USD range, with its trajectory heavily dependent on the evolving situation in the Middle East. Markets will also closely monitor the Federal Reserve's June 25 board meeting, where discussions on potential easing of bank leverage rules could have broader capital implications. Technically, the USDMYR pair remains rangebound, orbiting its 5-day Exponential Moving Average (EMA) at 4.25. Price movement is expected to continue being primarily driven by geopolitical developments, with immediate support identified at 4.24 (S1) and resistance at 4.26 (R1). Related
The Star
6 hours ago
- The Star
Solar surge ahead for RE developers
PETALING JAYA: Renewable energy (RE) developers who were unsuccessful in the bid for the large-scale solar (LSS) projects in the previous programmes could benefit under LSS5+ where the requirement for bumiputra participation rate is set higher. Kenanga Research sees strong chances for companies like Cypark Resources Bhd , Malakoff Corp Bhd , SD Guthrie Bhd , Sunview Group Bhd , JAKS Resources Bhd and Solarvest Holdings Bhd to secure LSS5+ awards, given their previous unsuccessful bids in LSS5 and their likely continued interest in the programme. 'The higher bumiputra participation this time (versus only 25% in LSS5), should improve the chances for Malakoff, Cypark and SD Guthrie,' the research house noted in a sector report. Kenanga Research believes up for grabs are sizeable allocations of up to 500MW (high versus LSS5 of up to 30MW) and assuming awards mirror the 100MW blocks seen in LSS5, it estimates around 15 awards remain to be won. 'With the current solar panel prices, we expect winning tariffs to land between 14 sen/kWh and 18 sen/kWh, supporting a project internal rate of return (IRR) of roughly 8%,' said the research house. The other big winners of the LSS5+ will be the engineering, procurement, construction and commissioning (EPCC) contractors like Solarvest. Kenanga Research stated that solar EPCC players' order books are hitting all-time highs as they race to deliver Corporate Green Power Programme projects before the end-2025 deadline. At the same time, 4GW worth of LSS5 and LSS5+ contracts are about to hit the market, with completions targeted by end-2027, unlocking at least RM10bil in solar EPCC value, it stated. The research house projected the average price of solar modules to dip slightly as Tier-1 manufacturers flood the market. 'Given the low IRR of about 8% in LSS jobs and rising cost risks, we remain bullish on EPCC contractors over asset owners. 'In this space, we see market leader, Solarvest, stands out as a key beneficiary, expected to grab at least 30% of the EPCC market share,' Kenanga Research stated. Its top sector picks, however, are niche players like Pekat Group Bhd and Swift Energy Bhd, which stand out as profitability-focused RE players and offer cheap proxies to the RE play. RHB Research also favours the EPCC space within the RE sector, expecting the announcement of shortlisted bidders for LSS5+, which will introduce an additional 2GW, to take place in the coming months. The timeline will allow asset owners to further take advantage of the currently low solar panel prices – a trend that is expected to continue through to the end of the year. LSS6 is also anticipated to be launched in the second quarter of 2025, potentially adding another 2 GW of capacity. Both Kenanga Research and RHB Research are 'overweight' on the RE and power utility sectors.
Borneo Post
4 days ago
- Borneo Post
Solarvest secures Brunei's largest solar project, boosting order book to RM1.3 billion
Construction is expected to begin in the third quarter this year with completion targeted by the end of 2026. –Malay Mail photo KUCHING (June 19): Solarvest Holdings Berhad has secured Brunei's largest 30 megawatt (MW) solar photovoltaic (PV) power plant project, a move analysts say will strengthen its earnings visibility and boost its outstanding order book. The team with Kenanga Investment Bank Bhd (Kenanga Research) said the contract, worth RM100, will lift the group's year-to-date (YTD) job wins to RM604 million, on track to to hit its target of RM1.2 billion in financial year 2026 (FY26). The house also expects the project to deliver gross profit margin between 13 to 15 per cent, contributing to a total order book of RM1.3 billion. On June 16, the group said the project will be undertaken through Seri Suria Power (B) Sdn Bhd, a joint venture Solarvest's wholly-owned subsidiary Atlantic Blue (34 per cent), Serikandi Oilfield Services (36 per cent), and Khazanah Satu (30 per cent). The JV also signed a 25-year power purchase agreement (PPA) with Brunei's Department of Electrical Services (DES), under the Prime Minister's Office to develop and operate a 30MWac solar Kampong Belimbing, Kota Batu. Construction is expected to begin in the third quarter this year with completion targeted by the end of 2026. The engineering, procurement, construction and commissioning (EPCC) work will be handled by Serikandi Solarvest, a separate JV between Solarvest Borneo (49 per cent) and Serikandi Holdings (51 per cent). 'This contract adds positively to Solarvest's job wins, bringing its YTD tally to RM604 million. It also lifts the group's total order book to RM1.3 billion, comprising 81 per cent large-scale solar (LSS) and 19 per cent commercial and industrial (C&I) projects. 'This will keep the group busy for at least over the next 18 months,' Kenanga Research said. The house added that the project is expected to yield a higher tariff of 18 to 20 sen per kilowatt-hour (kWh) compared to the 13 to 16 sen per kWh rate under Malaysia's LSS5 programme. Based on current panel prices, the internal rate of return (IRR) is estimated at around 10 per cent. RHB Investment Bank in a separate note said management expects the project's IRR to be in line with Malaysia-based projects, ranging from high single digits to low teens. The total capital expenditure is estimated at BND35 million, structured with a 70:30 debt-to-equity ratio. Based on Solarvest's 34 per cent stake, the project is expected to contribute RM2 to RM3 million in earnings per year. Excluding project financing, the group's net gearing is projected to rise to approximately 0.21 times. brunei corporate news solar energy Solarvest
