Following Kenanga Research’s recent visit to the Inari production facility, the research house said that the pool’s utilization rate is expected to gradually increase to around 90% closer to the launch date, compared to the 75% current.
“Interestingly, Inari also brought in more RF testers at the customer’s request, to be installed at the P55 plant while the P13 plant is already fully occupied.
“We view this as a positive sign, indicating that the US smartphone maker is confident in the marketability of the upcoming model,” he added.
Additionally, Kenanga Research saw a positive change in the facility, which was the integration of its proprietary electromagnetic interference (EMI) machines with each RF tester.
He said this further widens the gap between the company and its competitors, increasing customers’ dependency on Inari.
“One difference we noticed during the plant tour compared to a previous visit before the pandemic is the integration of EMI protection equipment with each RF tester,” Kenanga Research said in the report.
“While Inari RF filters are still used for the sub-6 Gigahertz (Ghz) bandwidth in the final product, the group interestingly noted that the filter capacity could be extended up to a 20 Ghz range. .
“Hence the need for EMI equipment to ensure test results are obtained in a controlled environment,” added Kenanga Research.
Going forward, the group is confident that its direction is in line with customer needs and expectations, as “double-sided molding (DSM) enables higher chip density per printed circuit board (PCB), a slimmer design and a reduction in PCB usage. ”
Inari is also two years ahead of mass adoption regarding his venture into the radio frequency double-sided molding (DSM) process, the research house noted.
As such, Kenanga Research holds an “outperform” option on Inari with an estimated target price of RM3.30 at 28.5 times P/E for the fiscal year ending June 30, 2023.
“This represents a slight premium to its peers forward average of 26 times, justified because Inari is the closest player to 5G adoption, able to maintain strong margins while expanding its revenue stream with new business,” he said.
However, risks to its call include less aggressive orders from its key customer, 5G rollout delays and higher input costs.