Inari Amertron had its rating adjusted from Buy to Neutral and saw its target price of RM3.60 maintained, reflecting a potential downside of 7.3%, as cited by RHB Investment Bank (RHB), in its recent company Update. The analysis highlighted subdued near-term earnings growth due to margin pressures, despite anticipated boosts from new product lines and expansion plans set to drive FY25F performance.

RHB's decision to downgrade INRI to Neutral (from the previous BUY rating) stems from its peak valuation, currently trading at a forward Price-to-Earnings (P/E) of 34x, which is +2 standard deviations above its 5-year mean. The bank acknowledges INRI's growth prospects in the upcoming cycle but advises accumulation at lower price levels for an optimal investment strategy.

The bank's Fiscal Year 2025 (FY25) earnings forecast anticipates 25% growth, supported by new smartphone technologies and expansions. However, risks include potential underperformance in smartphone sales amidst competitive pressures and geopolitical tensions affecting production yields and costs.

Despite recent market optimism driving a Year-to-Date (YTD) price rally of 28.9%, RHB underscores the risks associated with INRI's high valuation and advises cautious investment amidst uncertainties in global smartphone demand and operational challenges.

RHB maintains its target price at RM3.60, reflecting a 31x P/E (+1.5 standard deviations from its 5-year mean) including a 2% Environmental, Social, and Governance (ESG) premium due to INRI's above-average ESG score of 3.1. Investors are advised to monitor developments closely, particularly around sales performance and production efficiencies, to gauge future investment decisions.