Inari’s earnings to improve, boost from Broadcom

Both Inari and ViTrox are beneficiaries of a weaker ringgit against US dollar.

KUALA LUMPUR: Inari Amertron Bhd, the country’s biggest semiconductor player, is set to see  earnings improve in the coming quarters, partly thanks to its  key customer Broadcom’s wireless business.

Inari’s near-term outlook remains encouraging with a likely earnings rebound in the fourth quarter (Q4 FY16) following key customer Broadcom’s upbeat guidance for its wireless segment, according to Affin Hwang Capital Research. 

Reaffirming its buy rating and a 12-month target price of RM3.54, the research firm said on Tuesday Inari appears to be on track to register revenue growth of 20% for Q4 over the previous quarter. 

This is underpinned by a combination of reasons: low base in Q3 where revenue fell 26% quarter-on-quarter (qoq), strong shipments by a South Korean customer, Q3 net profit stood at RM21.4mil, lower than RM38.1mil a year ago.

Broadcom’s president Hock Tan said the wireless division was expected to see mid-20% sequential revenue growth in the upcoming quarter, adding that strong revenue growth should further sustain in the following quarter as it would capture the full ramp of its North American customer. 

However, apart from the usual strong seasonal ramp, the next generation phones are also expected to see higher RF content per device, it added, noting that it was consistent with the growth that the research outfit was projecting for Inari’s RF segment.

“We expect the number of Inari’s RF testers to hit 680 units by September (from the present 609 units). This represents a 61% increase from the 422 units as at end-June 2014. Thus far, capacity has mirrored Broadcom’s own expansion, although we understand that the capacity still lags behind Broadcom’s own wafer-fab expansion, which has effectively doubled over the same period,’’ Affin Hwang said.

Moreover, it noted that the completed renovation of Plant 21 by end-June 2016 should pave the way for further expansion ahead. 

Approximately 50 new testers are expected to be installed as part of Phase 1 to cater to Broadcom’s wired division. These new products would likely encompass network switches used in the cloud and data-storage space.