► TA SECURITIES
A MEMBER OF THE TA GROUP
Monday, August 04, 2025
FBMKLCI: 1533.35
Sector: Technology
THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY*
Inari Amertron Berhad
Jointly Acquires Netherlands-based Lumileds for USD239mn
INARI and China’s Sanan to Jointly Acquire Netherlands-based Lumileds for USD239mn
INARI has partnered with China’s Sanan Optoelectronics Co. Ltd (Sanan) to jointly acquire the entire stake in Lumileds Holding B.V. (Lumileds) and its subsidiaries for a total enterprise value of USD239.0mn (RM1.03bn). The acquisition will be fully satisfied in cash and executed through a special purpose vehicle incorporated in Hong Kong, jointly owned by Sanan (74.5%) and INARI (25.5%). Meanwhile, a total working capital of USD71.4mn will be injected into the special purpose vehicle for working capital purposes. The final purchase price will be determined based on the completion statements issued by an independent accountant later.
For INARI, the total investment outlay for this acquisition will be approximately USD71.4mn (RM307.0mn) for the 25.5% stake. The investment will be funded using the remaining proceeds from its private placement exercise completed in July 2021. The special purpose vehicle will become an associate company of INARI.
Sanan is an established high-end light-emitting diode (LED) chip manufacturer in China. Meanwhile, Lumileds is primarily engaged in the development, manufacturing, and sale of LED products and solutions for the automotive lighting, camera flash, and specialty illumination end markets.
The proposed acquisition is subject to approval from Sanan’s shareholders and the relevant regulatory authorities. The deal is expected to be completed by IH2026.
Our View
Overall, we are positive about the proposed acquisition. The JV acquired the entire stake at an approximately 17% discount to the indicative market valuation of USD287.0mn, as assessed by the independent valuer JZ (Shanghai) Assets Appraisal Co. Ltd. The proposed acquisition will enable INARI to diversify its product portfolio and customer base, reducing its reliance on a key smartphone customer. In addition, the deal provides INARI with access to a global customer base and potential synergies through its backend assembly and testing capabilities.
However, given Lumileds’ current loss-making status, we do not expect the proposed acquisition to immediately boost earnings. In FY24, Lumileds recorded a net loss of USD67.0mn, followed by a USD17.0mn net loss in IQFY25. Management is confident that the JV will be able to enhance Lumileds’ operational efficiency, which is expected to be earnings accretive over the medium to long term. Funding will not be an issue, given that INARI has a robust balance sheet with a strong cash position of RM2.Ibn and zero borrowings as at the end of 3QFY25.
Forecast
No change to our FY25 to FY27 earnings forecasts for now, pending the completion of the acquisition.
Valuation & Recommendation
No change to our target price of RM2.11, based on unchanged 25xCY26 earnings and a 3% ESG premium. Downgrade the stock from Hold to Sell due to limited potential upside following the recent price rally.
[Chart showing Forward PE from Apr-19 to Jul-25 with Mean: 32.0x, +1sd: 39.9x, -1sd: 24.2x]
Source: Bloomberg, TA Securities
[Chart showing Forward EV/EBITDA from Apr-19 to Jul-25 with Mean: 21.3x, +1sd: 26.8x, -1sd: 15.8x]
Source: Bloomberg, TA Securities
Earnings Summary
P&L (FYE Jun 30, RMmn)
| FY23 | FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|---|
| Revenue | 1,354.0 | 1,478.7 | 1,411.0 | 1,517.2 | 1,621.0 |
| EBITDA | 407.2 | 370.1 | 398.1 | 426.2 | 440.7 |
| Depreciation & amortisation | (106.7) | (123.1) | (164.9) | (160.1) | (156.2) |
| Net finance cost | 51.1 | 64.7 | 59.1 | 57.3 | 57.7 |
| EI | 3.0 | (1.5) | 0.0 | 0.0 | 0.0 |
| PBT | 354.5 | 310.1 | 292.3 | 323.4 | 342.2 |
| Taxation | (30.8) | (10.0) | (26.3) | (29.1) | (30.8) |
| MI | (1.5) | 0.1 | 0.3 | 0.3 | 0.3 |
| Net profit | 322.3 | 300.2 | 266.2 | 294.6 | 311.7 |
| Core net profit | 319.3 | 301.7 | 266.2 | 294.6 | 311.7 |
| EPS (sen) | 8.7 | 8.2 | 7.2 | 8.0 | 8.4 |
| DPS (sen) | 8.2 | 7.7 | 6.9 | 7.6 | 8.0 |
Balance Sheet (FYE Jun 30, RMmn)
| FY23 | FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|---|
| Fixed assets | 509.0 | 779.4 | 754.5 | 734.5 | 718.3 |
| Goodwill | 2.5 | 11.0 | 11.0 | 11.0 | 11.0 |
| Others | 9.9 | 19.9 | 19.9 | 19.9 | 19.9 |
| LT assets | 528.1 | 810.3 | 785.4 | 765.4 | 749.2 |
| Inventories | 183.2 | 181.0 | 185.0 | 199.0 | 212.6 |
| Trade receivables | 411.0 | 253.5 | 352.7 | 379.3 | 405.3 |
| Cash | 1,831.0 | 2,260.7 | 2,104.0 | 2,111.4 | 2,115.0 |
| Others | 13.4 | 48.5 | 48.5 | 48.5 | 48.5 |
| Current assets | 2,438.6 | 2,743.8 | 2,690.3 | 2,738.2 | 2,781.4 |
| Total assets | 2,966.8 | 3,554.1 | 3,475.7 | 3,503.6 | 3,530.6 |
| Trade payables | 276.1 | 274.7 | 185.7 | 201.3 | 214.8 |
| ST borrowings | 0.3 | 0.7 | 8.5 | 7.2 | 6.2 |
| Others | 55.0 | 72.8 | 72.8 | 72.8 | 72.8 |
| Current liabilities | 331.5 | 348.1 | 267.0 | 281.3 | 293.7 |
| LT borrowings | 15.2 | 16.0 | 5.7 | 4.8 | 4.1 |
| Others | 14.3 | 15.8 | 15.8 | 15.8 | 15.8 |
| LT liabilities | 29.5 | 31.8 | 21.5 | 20.6 | 19.9 |
| Share capital | 2,033.4 | 2,144.3 | 2,144.3 | 2,144.3 | 2,144.3 |
| Reserves | 569.2 | 649.5 | 662.8 | 677.6 | 693.2 |
| Shareholders’ funds | 2,602.6 | 2,793.8 | 2,807.1 | 2,821.9 | 2,837.4 |
| MI | 3.2 | 380.4 | 380.1 | 379.8 | 379.5 |
| Total liabilities and equity | 2,966.8 | 3,554.1 | 3,475.7 | 3,503.6 | 3,530.6 |
Cash Flow (FYE Jun 30, RMmn)
| FY23 | FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|---|
| PBT | 355.8 | 310.1 | 292.3 | 323.4 | 342.2 |
| Depreciation & amortisation | 106.7 | 123.1 | 164.9 | 160.1 | 156.2 |
| Net interest | (51.1) | (64.7) | (59.1) | (57.3) | (57.7) |
| Other non-cash | 11.7 | 13.5 | 0.0 | 0.0 | 0.0 |
| Changes in WC | 11.0 | 122.6 | (192.2) | (24.9) | (26.0) |
| Tax paid | (58.3) | (55.3) | (26.3) | (29.1) | (30.8) |
| Net interest | 51.4 | 65.5 | 59.1 | 57.3 | 57.7 |
| Others | (8.2) | 0.7 | 0.0 | 0.0 | 0.0 |
| Operational cash flow | 419.0 | 515.4 | 238.7 | 429.5 | 441.6 |
| Capex | (113.0) | (180.7) | (140.0) | (140.0) | (140.0) |
| Others | (137.2) | (11.6) | 0.0 | 0.0 | 0.0 |
| Investing cash flow | (250.3) | (192.3) | (140.0) | (140.0) | (140.0) |
| Net share issue | 47.0 | 103.3 | 0.0 | 0.0 | 0.0 |
| Dividend paid | (342.4) | (292.1) | (252.9) | (279.9) | (296.1) |
| Net change in debts | (0.8) | (0.7) | (2.5) | (2.1) | (1.8) |
| Others | (4.3) | 0.0 | 0.0 | 0.0 | 0.0 |
| Financial cash flow | (300.4) | (189.4) | (255.4) | (282.0) | (297.9) |
| Net cash flow | (131.7) | 134.1 | (156.8) | 7.4 | 3.6 |
| Opening cash flow | 1,917.4 | 1,803.5 | 2,260.7 | 2,104.0 | 2,111.4 |
| Forex | 17.8 | (3.3) | 0.0 | 0.0 | 0.0 |
| Closing cash flow | 1,831.0 | 2,260.7 | 2,104.0 | 2,111.4 | 2,115.0 |
Ratios, Growth & Leverage
| FYE Jun 30 | FY23 | FY24 | FY25F | FY26F | FY27F |
|---|---|---|---|---|---|
| Valuations | |||||
| PER | 24.5 | 26.1 | 29.5 | 26.7 | 25.2 |
| Dividend yield | 3.8 | 3.6 | 3.2 | 3.6 | 3.8 |
| PBV | 3.0 | 2.8 | 2.8 | 2.8 | 2.8 |
| Profitability ratios | |||||
| ROAE | 12.3 | 10.8 | 9.5 | 10.4 | 11.0 |
| ROAA | 10.8 | 8.5 | 7.7 | 8.4 | 8.8 |
| EBITDA margin | 30.1 | 25.0 | 28.2 | 28.1 | 27.2 |
| PBT margin | 26.2 | 21.0 | 20.7 | 21.3 | 21.1 |
| Liquidity ratios | |||||
| Current ratio | 7.4 | 7.9 | 10.1 | 9.7 | 9.5 |
| Quick ratio | 6.8 | 7.4 | 9.4 | 9.0 | 8.7 |
| Leverage ratios | |||||
| Total liabilities/equity | 0.1 | 0.1 | 0.1 | 0.1 | 0.1 |
| Net debt/equity | Nt. Cash | Nt. Cash | Nt. Cash | Nt. Cash | Nt. Cash |
| Int. coverage ratio | nm | nm | nm | nm | nm |
| Growth ratios (%) | |||||
| Sales | (12.5) | 9.2 | (4.6) | 7.5 | 6.8 |
| Pretax | (20.2) | (12.9) | (5.7) | 10.7 | 5.8 |
| Earnings | (17.3) | (5.9) | (11.8) | 10.7 | 5.8 |
| Total assets | 2.5 | 19.8 | (2.2) | 0.8 | 0.8 |
Sector Recommendation Guideline
OVERWEIGHT: The total return of the sector, as per our coverage universe, exceeds 12%.
NEUTRAL: The total return of the sector, as per our coverage universe, is within the range of 7% to 12%.
UNDERWEIGHT: The total return of the sector, as per our coverage universe, is lower than 7%.
Stock Recommendation Guideline
| BUY : | Total return of the stock exceeds 12%. |
| HOLD : | Total return of the stock is within the range of 7% to 12%. |
| SELL : | Total return of the stock is lower than 7%. |
| Not Rated: | The company is not under coverage. The report is for information only. |
Total Return of the stock includes expected share price appreciation, adjustment for ESG rating and gross dividend. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting.
Total Return of the sector is market capitalisation weighted average of total return of the stocks in the sector.
ESG Scoring & Guideline
Environmental
Inari’s is committed towards the United Nation’s Sustainable Development Goal 13 on Climate Action. It is certified by local and international governing bodies including Certificate of Green Partner (Sony) and REACH Certificate of Compliance. Environmental impact is regularly monitored and assessed via key metrics including energy consumption, greenhouse gas emissions, water, and waste management.
Social
Inari is committed to uphold and protect employees’ rights (including foreign labour). Positive feedback (96% score) from employee engagement survey. Zero cases of disputes on human and labour rights. Undertakes CSR initiatives.
Governance
Inari is highly transparent on ESG initiatives and progress. Complies with requirement for 1/3 board to be Independent Directors and at least 1 woman director, albeit near minimum levels with 36% independent and 2 females. Practices clear transparency via regular engagement with stakeholders including analysts and investors on the company’s outlook (e.g., via on-demand briefings, quarterly conference calls).
Average
| ★★★★★ (≥80%) | Displayed market leading capabilities in integrating ESG factors in all aspects of operations, management and future directions. | +5% premium to target price |
| ★★★★ (60-79%) | Above adequate integration of ESG factors into most aspects of operations, management and future directions. | +3% premium to target price |
| ★★★ (40-59%) | Adequate integration of ESG factors into operations, management and future directions. | No changes to target price |
| ★★ (20-39%) | Have some integration of ESG factors in operations and management but are insufficient. | -3% discount to target price |
| ★ (<20%) | Minimal or no integration of ESG factors in operations and management. | -5% discount to target price |
