Broker: UOB Kay Hian
Date of Report: Friday, 29 August 2025
Inari Amertron: Strategic Moves Position Malaysia’s Semiconductor Giant for Next Wave of Growth

Overview: Inari Amertron’s FY25 Performance and Forward-Looking Strategy

Inari Amertron Bhd, Malaysia’s largest semiconductor company and a top OSAT (Outsourced Semiconductor Assembly and Test) supplier for Broadcom’s Radio Frequency (RF) components, has released its FY25 results. The company continues to manufacture and assemble optoelectronics and fiber-optics related components, positioning itself to capitalize on the exponential growth of the advanced packaging market. Despite short-term earnings headwinds, Inari is setting the stage for diversified growth through strategic partnerships and acquisitions.

Key Highlights and Stock Data

• Share Price: RM1.98
• Target Price: RM2.36 (Upside: +19.2%)
• Market Cap: RM7,502.2m (US\$1,777.8m)
• Shares Issued: 3,789.0 million
• Sector: Information Technology
• 52-week High/Low: RM3.23 / RM1.45
• Major Shareholders:
  • Employees Provident Fund: 13.5%
  • Insas Berhad: 12.9%
  • Kumpulan Wang Persaraan: 10.2%
• FY26 Net Asset Value/Share: RM0.74
• FY26 Net Cash/Share: RM0.55

FY25 Financial Results: Within Expectations, Ready for the Future

Although the FY25 results were in line with house estimates, they came in slightly below consensus. Inari Amertron reported a softer core net profit for 4QFY25 of RM53.8m, down 11% quarter-on-quarter and 14% year-on-year. For the full year, core net profit was RM253.5m, down 17% year-on-year. This achievement met 100% of UOBKH’s forecast and 98% of consensus, with core net profit adjusted for unrealized forex losses of RM35.7m. A fourth single-tier dividend per share (DPS) of 1.2 sen was proposed, bringing total YTD DPS to 5.5 sen versus 7.7 sen last year.

Segment Analysis: Headwinds and Opportunities

• FY25 sales dropped 9% year-on-year, primarily led by the automobile and industrial segments, which saw a steep 34% decline.
• Depreciation charges increased to RM137.9m (vs RM123.1m in FY24).
• Core net profit fell by a larger 17% due to the US dollar depreciating 6% against the Malaysian ringgit.
• Quarter-on-quarter, revenue was down 1% and core net profit dropped by 11%, affected by higher administrative expenses.

Key Financial Metrics: Growth, Profitability, and Valuation

Strategic Partnership: Lumileds International Acquisition

A major highlight for Inari Amertron is its partnership with San’an Optoelectronics to acquire 100% of Lumileds Holdings B.V. and its 11 Asian and European subsidiaries for a total enterprise value of US$239m, satisfied wholly in cash. This deal will be executed via a Hong Kong-incorporated SPV, jointly owned by San’an (74.5%) and Inari (25.5%), and will be accounted for as Inari’s associate. Both parties will inject US$41m into the SPV for working capital, for a total investment outlay of US$280m. Inari’s portion—US$71.4m (RM307m)—will be funded by its unutilized private placement proceeds.

Why This Acquisition Matters

• Accelerates Inari’s expansion into automobile and specialty illumination LED segments.
• Aligns with the long-term vision for a vertically integrated, diversified technology platform.
• Immediate synergies from Lumileds’ backend LED assembly operations in Penang (>2,500 staff).
• Reduces customer concentration risk and moderates earnings cyclicality.
• Gives access to global Tier 1 automobile OEMs, leading LED module suppliers, and specialty applications in consumer and industrial markets.

Market Sentiment and Valuation

Inari’s share price has dropped 35% year-to-date, pressured by:

• Concerns over further moderation in smartphone demand amid tariff-driven price pressures.
• Investor caution as the market digests the Lumileds acquisition.
• Ongoing US-China trade tensions, which amplify supply chain risks.

Despite these headwinds, the stock trades at approximately -1 standard deviation below its seven-year mean PE, signaling a potential cyclical bottom and an attractive entry point for long-term investors. The RF segment is expected to rebound strongly in 2H25, driven by market share gains, new flagship launches, and incremental volume support from its key US customer.

Earnings Revision and Recommendation

• Minor tweaks to FY26–27 earnings (+1%/-1%) following model updates for housekeeping purposes.
• BUY maintained with a target price of RM2.36, based on 30x FY26F PE (seven-year mean forward PE).
• Ex-cash FY26F PE stands at 19.7x (-1SD below seven-year mean), balancing risk and reward for investors.

Environmental, Social, and Governance (ESG) Updates

• Environmental: Inari is included in the FTSE4Good Bursa Malaysia Index since June 2020, meeting global standards.
• Social: Employs only foreign workers with legal permits; all employees receive at least minimum wage.
• Governance: Anti-Corruption and Bribery Policy in compliance with the MACC Act 2009 (Amendment 2018); no reported incidents in 2020.

Balance Sheet and Cash Flow Snapshots

Profitability and Growth Metrics

Conclusion: Inari Amertron Set for Growth Amid Short-Term Earnings Volatility

Inari Amertron’s current transition—marked by the Lumileds acquisition and strategic focus on high-growth segments—positions it well for the next wave of semiconductor market expansion. Despite near-term earnings softness and share price pressure, its diversified portfolio, robust balance sheet, and access to global Tier 1 customers underpin a compelling risk-reward proposition. Investors seeking exposure to Malaysia’s leading semiconductor player can find value at current levels, with a BUY recommendation and a target price of RM2.36.