Eye scanning technology to boost Inari’s growth

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

By S. PUSPADEVI

PETALING JAYA: Technology firm Inari Amertron Bhd’s move into iris scanning manufacturing earlier this year is starting to make headway as the venture will help fuel revenue growth of 18% for the financial year ending June 30, 2018 (FY18).

Analysts believe major smartphone makers will include this capability in their upcoming flagship models in the wake of higher mobile payments adoption and fingerprint verification.

They believe that a combination of foreign exchange rate and the new expansion, together with the company’s continued manufacturing activities in the wireless radio frequency (RF) and optoelectronics operations, will help support earnings growth.

Also, they said the global semiconductor industry’s prospects have improved. Inari’s share price reflects the optimism in its earnings prospects, having jumped nearly 36% since late December to close at RM2.17 per share yesterday.

CIMB Research kept an “add” rating on the stock with a higher target price of RM2.50, from RM2.18 previously.

The research house said the latest third-quarter ended March 31 results were above expectations and were supported by resilient demand for flagship smartphone model launches in the second quarter of calendar year 2017 onwards.

“We expect Inari to benefit from stronger global semiconductor sales in 2017, driven by sustainable demand amid global economic recovery,” said CIMB, adding that most research groups had projected an average of 7% sales growth in 2017 versus 1.1% last year.

It was optimistic on the Inari Optical Technology (IOT) venture catering to the iris scanners expansion. “IOT contributed about one month sales in the third quarter FY17 with a production capacity of 2.5 million units.

“We expect volume to increase to about 5 million units per month in the fourth quarter, with another gradual increase of up to 10 million units per month in the second half of this year,” CIMB said.

It added that IOT is estimated to make up about RM50mil or 4% to 5% of forecast revenue in FY17.

Meanwhile, RHB Research has kept a “‘buy” call with an unchanged target price of RM2.53 based on 2018 forecast price-earnings of 18 times.

The house said Inari’s third-quarter FY17 numbers were stronger year-on-year across the board due to higher capacity at its RF segment, although revenue was rather flattish.

“The RF segment is likely to hit close to 850 testers by end-2017 or early-2018 versus 700 units currently to cater to orders come June or July 2017 – ramp up for new smartphone launches in August or September this year,” RHB Research said.

On its iris scanning module division, RHB noted that Inari spent RM25mil to build installed capacity of 5 million units per month, and is looking to allocate another RM75mil in FY18 for further capacity expansion.