How to Decode Inari Amertron Bhd's Q3 Earnings？

INARI AMERTRON BERHAD demonstrated robust performance growth in the third quarter of the 2024 fiscal year. Revenue increased from RM276 million in the same period last year to RM348 million, marking a year-on-year growth of 26%. This growth was primarily driven by the increase in global smartphone shipments and the recovery of the semiconductor industry.

Despite facing rising cost pressures, the company's profit attributable to owners rose from RM57.4 million in the same period last year to RM73.7 million in the third quarter ending March 31, reflecting a year-on-year growth of 28.5%. This indicates that the company has achieved success in optimizing its cost structure and market expansion.

The Group, which focuses on the manufacturing of electronic products, demonstrated outstanding performance in its single reporting business segment this quarter. Geographic breakdown shows that revenue in the Malaysian, Singaporean, and Chinese markets increased year-on-year by 35%, 25%, and 29% respectively, reflecting the success of the company's expansion strategy in the global AI applications and high-speed optoelectronic devices market.

Despite achieving year-on-year profit growth, the Group faced significant pressure on its gross profit due to a substantial 30% increase in costs of sales. This cost escalation led to a reduction in the gross profit margin from 22.53% in the previous year to 20.08%.

In the pursuit of revenue growth, particularly with the launch of new products, the Group experienced a short-term dip in gross margins, as the strategy involved temporarily accepting lower margins on new products to gain market share.Going forward, the company needs to focus on cost control, especially in raw material procurement and operational efficiency improvements, to mitigate potential future cost challenges and sustain profitability.

For the nine-month period ended March 31, 2024, the issued and fully paid ordinary share capital of the Company increased from RM2,033,397,743 to RM2,100,328,045. This increase was achieved through the issuance of 25,407,900 new shares pursuant to the exercise of share options under the 2022 Employee Share Option Scheme ("ESOS 2022"). Apart from the aforementioned, there were no activities involving the issuance and repayment of debt and equity securities, share buybacks, share cancellations, shares held as treasury shares, or the resale of treasury shares during the quarter and financial period under review.

1.Third interim single-tier dividend of 1.40 sen per ordinary share amounting to RM52.3 million for the financial year ended 30 June 2023, paid on 7 July 2023.

2.Fourth interim single-tier dividend of 2.00 sen per ordinary share amounting to RM74.8 million for the financial year ended 30 June 2023, paid on 6 October 2023.

3.First interim single-tier dividend of 2.20 sen per ordinary share amounting to RM82.4 million for the financial year ending 30 June 2024, paid on 5 January 2024.

On 18 December 2023, Inari Matrix Sdn Bhd, a wholly-owned subsidiary, sold its 30% equity interest in PCL Inari Technologies Sdn Bhd (“PCLI”) to PCL Technologies Trading, Inc. for RM6,675,670. This resulted in a gain of RM174,401. The transaction was completed on 29 December 2023, and PCLI is no longer an associate company. There is no material financial impact on the Group's earnings per share, net asset per share, or gearing for the financial year ending 30 June 2024.

By 31 March 2024, Amertron International Limited, an indirect wholly-owned subsidiary, fully subscribed to the registered capital of RMB430,000,000 in cash and transferred 100% equity interest in Amertron Technology (Kunshan) Co. Ltd. (“ATK”) to Yiwu Semiconductor International Corporation (“JV Company”), amounting to RMB491,000,000. With these contributions, the Group gained control, and the JV Company became a 54.46% indirectly owned subsidiary.

The global smartphone market is growing, with shipments increasing by 7.8% in the first quarter of 2024, driven by the rapid introduction of AI-capable models according to IDC. Additionally, Gartner forecasts a 17.4% growth in worldwide semiconductor revenue in 2024, led by a 70.5% increase in memory due to AI demand.

The semiconductor industry in Malaysia is poised for a promising trajectory, benefiting from AI advancements and geopolitical shifts. The Group is well-positioned to capitalize on these trends with improvements in production capacity, operational efficiencies, and a strong USD.

Investments in new technology development and facilities are expected to pave the way for new revenue streams and business expansion, despite short-term lower gross margins for new products.

Overall, the group anticipates continued positive results for FY2024.（The Group did not issue any profit forecast or profit guarantee previously in any public document.）