Inari to increase production ahead of US smartphone launch


Inari Amerton factory

KUALA LUMPUR: Chip assembly and testing firm, Inari Amertron Bhd is preparing to ramp up its radio frequency (RF) business for a smartphone launch in the United States in September.

Following Kenanga Research’s recent visit to Inari’s production facility, the research house said the group’s utilisation rate is expected to gradually increase to around 90% closer to the launch date, compared with the current 75%.

“Interestingly, Inari has also brought in more RF testers on customer’s request, which will be fitted in the P55 plant while the P13 plant is already fully occupied.

“We deem this a positive sign, indicating that the US smartphone manufacturer is confident of the upcoming model’s marketability,” it added.

Furthermore, Kenanga Research saw a positive change in the facility, which was the integration of its proprietary electromagnetic interference (EMI) machines with each RF tester.

It said this further widens the gap between the company and their competitors, increasing customer’s dependency on Inari.

“A difference we noticed during the plant tour compared to a previous visit before the pandemic, is the integration of the EMI shielding equipment with each RF tester,” Kenanga Research said in the report.

“While the RF filters from Inari are still used for the sub-6 Gigahertz (Ghz) bandwidth in the end-product, the group interestingly pointed out that the filter’s capability could actually be extended up to a range of 20 Ghz.

“Hence, the need for EMI equipment to ensure that the test results are obtained in a controlled environment,” added Kenanga Research.

Moving forward, the group is confident that its direction is in line with customers’ needs and expectations as “the double-sided moulding (DSM) allows for higher chip density per printed circuit board (PCB), slimmer design and reduction in PCB usage.”

Inari is also two years ahead of mass adoption with regards to its venture into double-sided moulding (DSM) process for radio frequency, the research house noted.

As such, Kenanga Research is keeping an “outperform” call on Inari with an unchanged target price of RM3.30 at 28.5 times price-to-earnings ratio for financial year ending June 30, 2023 estimate.

“This represents a slight premium to peers’ forward average of 26 times, justified by Inari being the closest proxy to 5G adoption, able to sustain strong margins while expanding its revenue stream with new businesses,” it said.

However, the risks to its call include less aggressive orders from its key customer, delay in 5G roll-out and higher input costs.

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