WHILE remaining bullish on its prospects, analysts have generally slashed Inari Amerton Bhd’s target price to reflect the weaker tech sector sentiment amid rising interest rates.
Having fallen 20% year-to-date (YTD), CGS-CIMB Research said Inari Amerton’s share price is currently trading at 21 times CY2023F price-to-earnings ratio (P/E) ex-cash basis which is below its five-year historical mean of 26.4 times.
“Reiterate “add” rating on the stock with a lower RM4.30 target price (from RM4.95 previously) based on a lower 33 times CY2023F P/E vs 38 times previously which is at a 38% premium over its Malaysian OSAT (outsourced semiconductor assembly and test) peers’ net profit margin of 16.7% for CY2021-2023F mean,” opined analyst Mohd Shanaz Noor Azam in a results review.
“We think Inari commands a scarcity premium due to its size and unique position as a member of the Bursa FTSE4Good Index.”
According to CGS-CIMB Research, the company’s revenue in 2Q FY6/2022 dropped 2.5% quarter-on-quarter (qoq) due to lower sales from optoelectronics and generic IC packages which fell by 8.5% and 2.3% qoq respectively.
However, its 1H FY6/2022 revenue jumped by 18% year-on-year (yoy) due to higher sales across all divisions: radio frequency (+14%), optoelectronics (+15%) and generic IC packages (+36%).
Meanwhile RHB Research also maintained its bullish stance on Inari Amerton by reiterating its “buy” call with an unchanged target price of RM4.63.
“We remain upbeat on its earnings visibility, backed by the proliferation of 5G smartphones, while its mid-term growth driver would come from its new venture in China,” analyst Lee Meng Horng pointed out.
With regard to the company’s recent share price weakness, RHB Research also attributed it to worries over high inflation and rising yield environment.
“We believe this has resulted in an opportunity for investors to accumulate the only technology stock in the FBM KLCI – given its growth visibility which in turn stems from (i) mid-term structural growth of the 5G story; and (ii) growing demand for semiconductor chips coupled with a (iii) a rock-solid balance sheet,” added the research house.
At 11.27am, Inari Amerton was down 5 sen or 1.56% to RM3.15 with 8.84 million shares traded, thus valuing the company at RM11.67 bil. – Feb 21, 2022
