Maybank Investment Bank Berhad
Date of Report: September 1, 2025
Inari Amertron: Awaiting Re-Rating Triggers as Semiconductor Momentum Builds

Overview: Inari Amertron Navigates Industry Shifts with Cautious Optimism

Inari Amertron, Malaysia’s largest semiconductor player and a key outsourced semiconductor assembly and test (OSAT) provider for Broadcom, remains in a holding pattern as it awaits significant catalysts for a potential re-rating. The company’s recent briefing highlighted a mix of encouraging customer forecasts and ongoing strategic initiatives, tempered by near-term uncertainties surrounding key segments and joint venture (JV) activities.

Stock Snapshot and Valuation

– Current Share Price: MYR 2.03 – Target Price: MYR 2.14 (implying +8% upside) – Recommendation: HOLD – Valuation Basis: 23x CY26E EPS (-1SD 5Y forward mean) – Market Capitalisation: MYR 7.6B (USD 1.8B) – Free Float: 67.2% – Major Shareholders: Employees Provident Fund (13.5%), Insas Bhd. (13.4%), Kumpulan Wang Persaraan (10.2%)

Operational and Market Update

Production and Customer Engagement

– Production is on schedule for a major flagship smartphone launch on September 9, 2025. – New product introductions (NPIs) and qualifications are progressing across both smartphones and wearables. – Quarter-on-quarter utilisation rates have improved, with future growth tied closely to demand for upcoming smartphone models. – Customer order forecasts are positive, particularly for memory and optoelectronics segments, which are expected to see higher production volumes.

Joint Venture Acquisition: Strategic Ambitions Tempered by Risks

– Management provided further insight into its JV acquisition strategy, aiming to leverage interposer-level, Micro-LED, and telecommunications technologies for deeper market penetration and enhanced customer support. – The JV process is ongoing, with a decision anticipated by the first half of calendar year 2026. – Near-term caution persists due to potential risks from prolonged Lumileds losses and regulatory approval uncertainties.

Financial Performance and Forecasts

Financial Highlights (FY24A–FY28E)

Key Financial Ratios and Metrics

• Revenue Growth (YoY): 9.2% (FY24A), expected dip of -8.6% (FY25A), followed by a strong rebound
• EBITDA Margin: 24.9% (FY24A), expected to expand to 28.0% in FY26E
• Core Net Profit Margin: 20.3% (FY24A), expected to rise to 19.1% by FY28E
• Net Gearing: Net cash position throughout forecast horizon
• Dividend Payout Ratio: 97.8% (FY24A), projected to remain above 84% through FY28E
• Current Ratio: Exceptionally healthy at >7.9x, reflecting strong liquidity

Business Model and Value Proposition

– Inari Amertron is a leading OSAT supplier, focusing on semiconductor back-end packaging, wafer processing, package assembly, and RF final testing. – The 2013 acquisition of Amertron expanded capabilities into optoelectronics and fibre-optic packaging. – Inari is actively diversifying its customer base, engaging new clients in strategic industries to reduce concentration risk and broaden revenue streams.

Growth Drivers and Risks

Potential Upside Catalysts

• Stronger-than-expected global smartphone sales, especially as flagship launches approach
• Increased contributions from emerging business segments such as optoelectronics and generic components
• Market share gains in the radio frequency segment and possible breakthroughs in China
• Earlier-than-expected turnaround at the Yiwu plant

Downside Risks

• Potential global electronics market downturn, especially in smartphones
• High customer concentration: The largest client accounts for an estimated 60–70% of FY25 revenue
• Lower-than-anticipated production yields or volumes could compress margins
• Significant USD/MYR exposure: >95% of revenue and ~50% of COGS are USD-denominated
• Technology obsolescence threatening long-term competitiveness and market share

Balance Sheet and Cash Flow Highlights

Cash Flow Summary (MYR m)

• Free Cash Flow: MYR 335.4m (FY24A), expected to range between MYR 209.3m and MYR 407.4m through FY28E
• Capex: MYR 180.1m (FY24A), gradually declining to MYR 100m per year by FY28E
• Dividend Payments: Substantial, with a high payout ratio sustained

Conclusion: Steady Progress but Waiting for a Breakout

Inari Amertron is maintaining course amid evolving industry trends, with improvements in customer loading and production efficiencies. However, the company’s growth trajectory hinges on the success of upcoming flagship smartphone launches and the materialization of upside from its JV acquisition and new business segments. While the current valuation, robust balance sheet, and solid cash flow generation provide downside protection, substantial re-rating is likely contingent on demand surprises or strategic execution wins.

About Inari Amertron

– The largest OSAT player in Malaysia, serving as a top supplier for Broadcom’s wireless division. – Actively expanding into optoelectronics, memory, and emerging technology segments. – Strong liquidity, net cash position, and a prudent approach to expansion and capital returns.

Investment Rating Definitions

• BUY: Expected return above 10% in the next 12 months (including dividends)
• HOLD: Expected return between 0% and 10% in the next 12 months (including dividends)
• SELL: Expected return below 0% in the next 12 months (including dividends)

Current rating: HOLD (Target Price: MYR 2.14, as of September 1, 2025)
For further details, investor relations, or research inquiries, contact Maybank Investment Bank Berhad’s Technology sector analyst Lucas Sim ([email protected]).