Inari earnings momentum to grow as 5G adoption kicks in

KUALA LUMPUR: Inari Amertron Bhd's should see growing earnings momentum as the adoption of 5G starts picking up speed, says Affin Hwang Capital research.

For the first quarter of its 2020 financial year, Inari recorded a core profit of RM46mil, which was 11% lower year-on-year. It accounted for 19% of Affin Hwang's and consensus full-year estimates.

However, the research house said the earnings were within expectations as they should improve in 2HFY20 with increased sales of 5G-related filters.

Ebitda margin was relatively stable at 23.9%. Lower contribution from the higher-margin sensor business might have negated margins, which was likely made up by the 1.7% y-o-y depreciation of the ringgit versus the US dollar.

"We maintain our BUY rating with a higher target price of RM2.14 based on a higher target PE multiple of 24x or +1SD above its 5-year mean (previously 20x) on CY20E EPS as we take into account the improved investor sentiment and appetite for the sector," Affin Hwang said.
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