Inari favoured despite price weakness

ANALYSTS are not writing off technology player Inari Amertron Bhd whose share price has dwindled of late, given the expected demand for advanced semiconductor packaging driven by artificial intelligence (AI) investments.

Inari’s share price dipped 8.9% to RM1.84 from its May 20 close of RM2.02 when its third-quarter results (3Q25) ended March were released. The group’s net profit for the three months declined 24.7% year-on-year while cumulative net earnings fell 30.9% on slower revenue.

It has since rebounded to RM1.97 as at the time of writing.

The subdued performance was one of the key reasons for the share price volatility, analysts say. The price was also affected by a significant foreign-exchange loss of RM53.3mil, with the US dollar weakening against the ringgit earlier this year.

Additionally, Inari earnings per share (EPS) declined 19% over the last year and 42% over three years, indicating weakening earnings.

While Inari has outperformed the industry in net income growth – at 7.1% compared to 0.8% industry average over five years, according to investment platform Simply Wall Street – the broader market’s concerns about a potential global economic slowdown and softer demand for mobile devices have impacted investor sentiment.

Despite all that, Inari has steadfastly remained among the industry’s “buy” calls, or at least in favourable view, of a host of research houses, including Hong Leong Investment Bank (HLIB) Research, UOB Kay Hian (UOBKH) Research and CIMB Securities, while also improving its standing from “trading sell” to “neutral” with MIDF Research.

This is because of positive factors like its strong net cash position of over RM2bil, and expectations of rising demand for advanced semiconductor packaging driven by AI investments.

Analysts are forecasting revenue growth of 14% to RM1.57bil in 2026 and a 44% surge in EPS to 8.5 sen, indicating potential recovery.

HLIB Research predicts potential radio frequency (RF) content gains for 2026, suggesting investors accumulate the stock on price pullbacks.

The sentiment is echoed by UOBKH Research, which reveals in its late May report that its channel checks indicate Inari’s RF segment is sustaining a relatively healthy utilisation rate of 65% to 70%.

“This resilience is likely underpinned by higher RF content per device and incremental volume support from the rollout of new and more affordable models by its primary US customer,” says the research house.

Furthermore, UOBKH Research points out that although Inari’s 2025 growth will remain largely driven by its flagship RF business, the group has begun venturing into advanced packaging platforms such as flip-chip chip-scale packages, flip-chip ball grid arrays, and 2.5D/3D stacked packaging.

The research house reports that venturing into advanced packaging is a game-changing move that demands state-of-the-art technical expertise, significant capital investments, a supportive ecosystem and strong customer commitment.

“While this combination of factors establishes a formidable barrier to entry, the advanced packaging market presents a highly lucrative opportunity, with a total addressable market of US$1 trillion to growing digital markets, on an expected compounded annual growth rate of 11% from 2023 to 2029,” it said.

The research house believes that Inari is in close collaboration with its key technology partners and is poised to commercialise its new product pipelines in the coming quarters.

It says this strategic initiative is also bolstered by Inari’s strong capabilities, a well-established customer portfolio, and the backing of Malaysia’s progressive policies.

CIMB Securities, keeping its “buy” call on the counter, is pegging its valuation to 24 times price-to-earnings ratio (PER), which is about one standard deviation below the Malaysian outsourced semiconductor assembly and test (OSAT) sector’s five-year mean PER of 34 times.

The brokerage says while this reflects the sector’s weaker sentiment, driven by a subdued demand outlook for non-AI applications, Inari remains a preferred pick in the local technology sector.

CIMB Securities says Inari holds strong mergers and acquisitions potential, supported by its robust cash position with zero borrowings.

Another analyst at a foreign research house highlights that Inari’s presence in Malaysia, China and the Philippines, with 11 plants in total, helps mitigate risks associated with supply chain disruptions, such as geopolitical tensions or natural disasters, which have exposed vulnerabilities in the highly concentrated semiconductor supply chain.

The analyst says that despite China’s economic slowdown, Inari is strengthening its presence in the country through a joint venture (JV) with China Fortune-Tech Capital Co (CFTC) to establish an OSAT manufacturing business focused on local demand.

“Inari contributes technical expertise and its Amertron Technology (Kunshan) facility to the 55:45 JV, while CFTC provides market access, regulatory guidance and local talent. This move diversifies Inari’s income stream and capitalises on China’s push for semiconductor self-sufficiency,” she says.

She notes that this is part of efforts to diversify its customer base to reduce dependence on its major client, Broadcom Inc, which accounts for about 90% of its revenue, primarily through Singapore operations.

The analyst adds: “The company is engaging new and existing customers for its RF, optoelectronics and sensor segments, leveraging its expertise in high-volume manufacturing and customised solutions.

“This aligns with global trends towards multi-sourcing strategies, where companies qualify multiple suppliers for critical components to ensure continuity.”

Moreover, she says the group’s strategy for growth aligns with Malaysia’s National Semiconductor Strategy and regional trade agreements.

While US tariffs and Beijing’s slowdown may pose risks, Inari’s expansion in China focuses on high-value manufacturing and operational efficiencies position it to mitigate these challenges and contribute to Malaysia’s export diversification goals.