It said on Friday Inari remains a good proxy to Broadcom’s growing wireless division.
“Also, it is well placed to benefit from growth in the data-communications market, as the bandwidth-upgrade cycle plays out.
“Management has been proactive in finding new revenue streams and we are optimistic that this can improve its large, single customer exposure risk,” it said.
Affin Hwang Research said using an unchanged 18 times CY17E price-to-earnings ratio (PER), it raised the 12-month target price to RM3.80 (bull-case scenario valuation: RM4.38), from RM3.54.
It said Inari’s new network-switches division ramp up is progressing well and testing equipment is marching towards more than 40 units by June 2017, providing a new earnings stream.
Meanwhile, a section of plant P21, is undergoing qualification process for a new biometric-identification chip.
“Even without contribution from this chip, we still look for a 21% earnings CAGR over FY16-19E. We lift our TP by 7% to RM3.80 on our higher earnings. Reaffirm Buy,” it said.
Affin Hwang Research said the maiden revenue from Inari’s network switches should kick in from FY17, though it only expects this unit to breakeven this year.
Thirteen units of testing equipment are being commercialised and operations should turn profitable as equipment levels reach the targeted more than 40 units for Phase 1 (mid-2017).
Also in plant P21, Inari is undergoing qualification for a new Infra red (IR) biometric-identification chip for a large multinational.
It pointed that since this is gradually being adopted by smartphone manufacturers, prospects for this technology look exciting given rising security requirements for the e-payment market.
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