KUALA LUMPUR (June 9): AmInvestment Bank has upgraded Inari Amertron Bhd to “Buy” at RM1.55 with a higher fair value (FV) of RM2.01 (from RM1.69) and said this is pegged to a higher CY21F PE of 23.5x (previously 17.5x) in line with its 5-year historical average PE, reflecting the scarcity premium of technology stocks in the local market and Inari’s role as a proxy to 5G growth.
In a note today, AmInvestment cut Inari’s FY20F earnings by 26% to account for expectations of lower overall sales amid Covid-19 uncertainties and consequently trim its FY21F–FY22F earnings by 2-8%.
“The demand for optoelectronics products will continue to be weighed by weak market conditions, particularly for the automotive and industrial segments, however we believe that Inari’s RF demand is still intact amid expectations of ramp-up in 5G orders.
“Furthermore, higher chip complexity and RF content per device in 5G phones would help mitigate weaker smartphone demand for the year due to Covid-19.
“We like Inari as we deem that short-term uncertainties relating to Covid-19 and weak market conditions for optoelectronics anticipated to impact FY20F earnings have been factored in, while upside from growth relating to 5G FY21F onwards has yet to be fully priced in,” it said.