Inari faces headwinds as analysts trim profit forecasts

PETALING JAYA: Inari Amertron Bhd’s earnings outlook remains challenging in the near term, with weaker radio frequency (RF) loadings and forex headwinds likely to weigh on sentiment.

Inari’s first quarter of the financial year 2026 (1Q26) mostly missed expectations, weighed down by softer turnover and margins.

Kenanga Research said the group’s 1Q26 core net profit of RM54mil (-28% year-on-year (y-o-y)), after excluding RM2.9mil unrealised forex losses and RM0.2mil reversal of slow-moving inventory) came in below expectations, achieving only 19% of its and 18% of consensus full-year forecasts.

On a y-o-y basis, revenue declined 16% to RM326mil on reduced volume loading across all segments, with RF, optoelectronics and generic down 21%, 1%, and 28% to RM199mil, RM107mil and RM19mil respectively.

Despite the weaker top line, pre-tax profit jumped 126% to RM54mil, driven by favourable forex movements, with unrealised forex losses narrowing sharply to RM2.9mil from RM47.2mil a year ago.

“Amid a challenging macro backdrop marked by persistent tariff uncertainties, geopolitical tensions and forex volatility, the semiconductor sector continues to see selective growth anchored by artificial intelligence (AI)-related demand.

“Inari is seeing sustained strength in data communications, flat smartphone demand and softness in the industrial semiconductors segment, while supply chain realignment from US tariff policies, deflationary pressures and increased onshoring in China continue to weigh on revenue and margins,” the research house said.

For the remainder of FY26, Kenanga Research said the group will prioritise new partnerships and advanced packaging capabilities to capture generative AI opportunities, with the proposed Lumileds acquisition still pending approval from the relevant foreign authorities.

Kenanga Research lowered its FY26 and FY27 net profit forecast by 10% and 7%, to RM258mil and RM287mil respectively, after trimming its turnover assumptions and recalibrating margins to current run-rates.

“We have yet to factor in any earnings contribution from Lumileds,” the research house said.

Kenanga Research downgraded its call for Inari to “market perform” (from “outperform”), with a lower target price of RM2.45 (from RM2.56).

CIMB Securities trimmed its FY26 to FY28 earnings per share forecasts by 2% to 10% to reflect a more moderate recovery trajectory across divisions, particularly in the RF segment.

The research firm said while 1Q26 performance was weak, it expects RF sales volumes to rebound from 2Q26 onwards, supported by resilient demand from new-generation smartphone launches.

“Notably, a major North American smartphone maker has guided for a strong December 2025 shipment cycle, which bodes well for Inari’s RF business. In the meantime, the group is expanding its RF capabilities by developing more complex RF module manufacturing for its key customer. However, we only expect meaningful contributions from these new design wins to materialise with next-generation model launches in 2026,” CIMB Securities said.

CIMB Securities downgraded its call for Inari to a “hold” from a “buy” while raising its target price to RM2.50 (from RM2.20).

Apex Securities said it now turns cautious on Customer B and Inari’s ability to retain its component share in the RF space, especially given the former’s shifting focus on more attractive growth areas.

“The silver lining is that the new smartphone model launches in FY27 may introduce a new form factor, potentially boosting interest in the refreshed product lineup and supporting RF shipment volumes during the year, provided Customer B and Inari are able to retain or gain component share in the next launch cycle,” the research house said, adding that pending updates from the analyst briefing, put its previous “buy” rating and target price of RM2.23 under review.

Meanwhile, Hong Leong Investment Bank (HLIB) Research said while Inari’s near-term outlook is challenging with weaker RF loadings and forex headwinds likely to weigh on sentiment and share price performance, it sees “scope to accumulate on significant pullbacks”, as it believes there are medium-term catalysts in store for Inari.

“These include potential RF content recovery in the next model cycle, pick-up in the optoelectronics segment, and completion of the Lumileds acquisition.