PETALING JAYA: Inari Amertron Bhd
is expected to capitalise on the Chinese smartphone market via a joint venture in Yiwu, China.
Meanwhile, its radio frequency (RF) segment is expected to pick up on a quarterly basis in the second quarter of financial year 2024, said Kenanga Research in a recent report.
The company is an investment holding company involved in the provision of electronic manufacturing, outsourced semiconductor assembly, and testing services for radio frequency devices, fibre-optics transceivers, optoelectronics, sensors, and custom integrated circuit technologies
The research house stated in a report that Inari’s “China for China; Penang for the West” approach puts the group in a good position to profit from the smartphone upcycle in both China and the West.
The company’s 500,000 sq ft plant in Yiwu, is scheduled to start operations by mid-2024, and is expected to put the company in a strong position to achieve one billion yuan in revenue and a possible listing within an aggressive three-year time frame. Inari owns 54.5% of the plant in a joint venture with Yiwu Semiconductor International Corp.
Kenanga Research said the local semiconductor player’s RF segment is also expected to pick up on a quarterly basis in the second quarter of its financial year 2023, after addressing inefficiencies in the previous quarter.
This is on top of replacement cycles approaching, which is especially significant as the shipment of the US-branded smartphone has been consolidating over the past eight quarters and a rebound is foreseen in 2024.
“The potential upswing could be rapid, considering the consolidation in the overall smartphone market has depleted inventories, suggesting limited downside risk,” the research house noted.
Consequently, if the smartphone industry performs better than expected, the supply chain may need to react quickly and increase output.
In addition, the competition for supremacy in artificial intelligence (AI) among the largest tech companies is expected to support the global semiconductor market.
According to Kenanga Research, US smartphone companies will likely reveal a significant technological advance in 2024 or 2025 during the next wave of product introductions.
This is believed to be due to the fact that current virtual assistants on some phones are starting to feel outdated compared to generative AI features of products from companies such as Microsoft, OpenAI and Google.
“The trend towards AI-powered smartphones has manifested itself in positive reviews for the recently launched Samsung Galaxy S24 range, featuring a slew of innovative AI features,” the research house added.
Kenanga Research has maintained its “outperform” call on Inari with an unchanged target price of RM4.17 per share, based on an unchanged financial year 2025 price-to-earnings ratio of 32 times.
The research house said it likes Inari as a close proxy to 5G adoption around the world, high responsiveness to market demand with rollouts of new technology, as well as its expansion in China, capitalising on the the country’s aggressive push for semiconductor self-sufficiency as it competes against the United States.
