Four star ESG rating for Inari Amertron

In a note on Friday, AmInvestment Bank, the research house, continued to ascribe a four-star environmental, social and governance (ESG) rating for Inari Amertron (KL:INARI), translating into a 3% premium to Inari’s FV.

“Over the longer term, we foresee stronger overall revenue growth for Inari, driven by: i) higher content requirements of radio frequency filters for new-generation smartphones; ii) higher demand for optical transceivers used in data centres; and iii) ongoing new product innovations, in tandem with new technological advancements.

Four star ESG rating for Inari Amertron

“From a valuation perspective, the stock currently trades at an attractive FY2025 P/E of 30 times, versus its three-year peak of over 40 times,” it said.

AmInvestment Bank has also maintained its ‘buy’ rating for Inari Amertron at RM3.70, with a higher fair value (FV) of RM4.36 (from RM3.86), based on price-earnings (P/E) of 34 times, from 31 times, for the financial year ending June 30, 2025 (FY2025) — 2.5 standard deviation above the five-year mean of 24 times.

This is on the back of improving sector sentiments, in tandem with rising demand for artificial intelligence (AI)-related products, as well as foreign direct investment in the country, against the backdrop of the National Semiconductor Strategy unveiled in May.

Inari’s datacom revenue grew by 9% year-on-year for the cumulative nine months ended March 31, 2024 (9MFY2024), driven by growing demand for 800G optical transceivers fuelled by the surge in AI and server requirements of data centres.

“The company alluded that four production lines for memory chips had been installed, and will slowly ramp up the run-rate by 10,000 units per day to a maximum capacity of 60,000 units per day by the third quarter of calendar year 2024.

“The purpose of the slow ramp-up is to monitor the production yield and quality.

“The management expects this product to generate FY2024 revenue of RM100 million to RM150 million, which is already included in our sales assumptions,” the research house said.