KUALA LUMPUR, 2 September 2025 – Kenanga Research has maintained its ‘Market Perform’ (Hold) rating on Inari Amertron, while raising its target price to RM2.25, reflecting confidence in the company’s strategic moves despite near-term challenges.
Kenanga’s Rationale: Strategic Investments Amid Earnings Pressure
Kenanga’s latest update—anchored around Inari’s acquisition of a 25.5% stake in Lumileds—recognizes the potential for long-term synergies. The deal, valued at RM1.03 billion (with Inari contributing RM307 million), offers access to elevated LED technology capabilities and a Penang backend manufacturing base with 2,500 employees. While Lumileds posted a net loss in FY24, Inari anticipates recovery and margin uplift due to integration with Sanan’s upstream operations. Kenanga preserves the RM2.00 TP from earlier but adjusts it in line with the higher forward P/E and strategic advantages.
The Ledger Asia’s Analysis: Cautiously Optimistic Amid Growth Headwinds
The raised TP reflects positive acknowledgment of Inari’s diversification efforts. However, several critical considerations underpin our more conservative stance:
- Earnings Decline: Inari’s FY2025 results showed weakness—revenue fell 8.6% y/y to RM1.35 billion, net income dropped 27% to RM218.7 million, and margins slipped to 16% from 20%. This downward revenue and earnings trend dampens immediate optimism.
- Stock Volatility and Valuation Pressure: The share price has plummeted over 40% YTD, far underperforming the broader FBM KLCI, raising investor concern about underlying structural risks despite its clean balance sheet.
- Sectoral Demand Outlook: Positive projections from CIMB anticipate a rebound fueled by AI data center infrastructure and memory-related testing demand. Still, execution risks remain, and projections such as a revised TP of MYR4.50 may prove optimistic.
The Ledger Asia Verdict: Kenanga’s maintained rating and revised TP reflect sentiment that Inari’s strategic pivot could yield medium- to long-term returns. However, current valuation, stretched margins, and earnings dip justify a balanced approach—making Hold the prudent play while monitoring catalytic developments.
