What Investors Need to Know Before Inari's Upcoming Earnings Report?

The company is scheduled to release its Q4 financial results for the fiscal year 2024 (As of June 30, 2024) on August 27.

Market expectations for FY2024Q4 financial performance of the company are as follows:

● It is projected to achieve a revenue of RM374 million, representing a year-over-year increase of 25.19%.

● Consensus basic adjusted EPS is RM0.02, an increase of 23.60% compared to the same period in the previous year.

● The average price target for Inari is RM3.36, suggesting a potential increase of 12.80%.

The development of the semiconductor industry in Malaysia presents a significant opportunity. The global market witnessed a strong surge in sales, reaching US$49.1 billion (RM231.26 billion) in May, marking a 4.1% MoM and 19.3% YoY increase. The AI frenzy has provided additional prospects for companies within the semiconductor supply chain. Consequently, amidst the reshaping of the global supply chain due to the trade war and the strategic backdrop of "China Plus One," the Malaysian semiconductor industry is seen as a beneficiary.

Furthermore, the National Semiconductor Strategy (NSS) recently announced by the Malaysian Government, which includes an allocation of RM25 billion, pledges to boost both domestic direct investment (DDIs) and foreign direct investment (FDIs).

In light of the expected introduction of AI-capable smartphones and the expansion of high-bandwidth opto devices in networks and data centers, Inari is well positioned to capitalize on these developments.

Inari, as a crucial OSAT partner for Broadcom's RF filter business, plays a significant role in supplying Apple and Samsung with cutting-edge smartphones. In the fourth quarter, the performance of the RF division is expected to improve due to increased utilization rates. This improvement is further supported by Inari's ability to enhance customer loyalty through innovative packaging solutions like double-sided moulding and system-on-module technology. As a result, Inari solidifies its leadership position in the local OSAT space, as stated in Kenanga's report.

Inari is making strides in its latest business endeavors, which include the establishment of a new 500,000 square foot plant in Yiwu, China. As of the end of May, many of the company's products have advanced to the qualification and sampling stages, and are expected to have a positive impact on the upcoming quarters as production increases. The rebound in sales of flagship smartphones in China may also boost the group's earnings, due to supply bottlenecks in China's national brands and significant discounts across various sales platforms.

Kenanga's analysts maintained an "outperform" rating for the company, with a target price of RM4.60. They anticipate a stronger performance in the upcoming 4QFY24. Kenanga believes that the company will continue to expand its already substantial revenue base (>1.5 billion ringgit) while maintaining an impressive net profit margin (>20%). This further highlights its exceptional ability, particularly in the face of rising labor and utility costs.

RHB Investment Bank maintains cautious optimism on Inari due to growth potential in the new upcycle, but suggests accumulating at lower levels. There are potential risks associated with the underperformance of the new major smartphone range, which has built-in hype around embedded AI features but lacks transformational changes to support it. The firm maintains a "Neutral" call on Inari, with a target price of RM3.60.

MIDF has revised downwards its earnings forecast for the financial years 2024 to 2026, with a reduction ranging from 7.9% to 16.3%. The revision reflects higher expenses, which better align with the group's current profit margins. The target price is RM3.11.