• Keep BUY and MYR2.45 TP, 15% upside with c.3% FY26F (Jun) yield. Inari (25.5%) and Sanan Optoelectronics (Sanan, 74.5%) will jointly acquire 100% of Netherlands-based company Lumileds for a total enterprise value of USD239m (~MYR1.03bn). We are neutral on this development over the short term, but positive over the medium term as this will enable INRI to diversify its revenue stream, boost its exposure to key growth areas, ramp up vertical integration, expand manufacturing capabilities, and improve ROE through strategic cash deployment.
• Lumileds is among the top original equipment manufacturers for aftermarket automotive lighting and accessories, camera flashes for mobile devices, MicroLEDs, and light sources for general illumination, horticulture, and human-centric lighting. The acquisition includes its 11 subsidiaries across Asia and Europe. In FY24 and 1Q25, it recorded revenue of USD589m and USD141m, with net losses of USD67m and USD17m. It has a share capital of USD468m.
• Sanan is a compound semiconductor player engaged in R&D and manufacturing of sapphire substrates, epitaxy, chips, and devices. It serves markets in LED and integrated circuits or ICs in microwave radio frequencies (RF), optical communication and power electronics segments. It is listed on the Shanghai Stock Exchange, and recorded an annual revenue of CNY16.1bn (FY24) and a market cap of c.CNY60bn (~USD8.bn).
• Strategic implications. The acquisition gives INRI the potential to become the preferred OSAT vendor for Lumileds/Sanan under the China Plus One strategy. It also opens captive business opportunities over the longer term, leveraging Sanan’s expertise in advanced packaging, SiC, GaN, and LED technologies. Based on the 25.5% stake, this investment in associates is estimated to be USD71.4m (~MYR307m) (9% of total asset and 14% of cash), to be funded from its 2021 placement proceeds. With strong operational synergies and complementary technical capabilities, we expect resource reallocation and cost optimisation post-deal, potentially turning around Lumileds (earnings-accretive by 2027F or 2028F). If losses are narrowed by 50%, the potential FY27 earnings impact (nine months) is estimated at c.8%.
• While the price is attractive at ~1.1x P/BV, we believe it is fair in view of Lumileds’ financial performance and industry headwinds. The USD239m valuation reflects a “willing-buyer, willing-seller” basis, benchmarked against Lumileds’ net assets of USD210m (as at 31 Dec 2024) and an appraised indicative market valuation of USD287m. The final consideration will be adjusted for net cash/debt and working capital. INRI and Sanan will inject USD41m (MYR176m) post-acquisition for working capital purposes.
• We maintain our forecasts and MYR2.45 TP, pending completion of the deal (expected in 3Q26) and further guidance, based on 31x P/E (+1.5SD from 5-year mean), inclusive of a 2% ESG premium. Key downside risks: Delayed approvals from various authorities, execution, and market dynamics.

Share Performance (%)

Forecasts and Valuation

Emissions And ESG

Trend analysis

In comparison to FY23, INRI recorded an increase in greenhouse gas (GHG) emissions, mainly due to higher new product introduction or NPI activities from new and existing customers. However, its GHG emissions intensity has been trending downwards over the past five years. Utilisation of green energy has yielded noticeable reductions in greenhouse gas emissions, by 1.4k tCO2e in FY24.

Emissions (tCO2e)

Latest ESG-Related Developments

INRI won the Silver prize at The Edge ESG Awards (Technology Sector), and is a member of the FTSE4Good Bursa Malaysia index. These put it among the companies with leading ESG practices, and it is in compliance with best practice disclosures. INRI has set a reduction target of 3% and 2% for its Scope 1 and Scope 2 emissions. It also advocates green development to align with the Climate Governance Malaysia target to reduce global warming and the aim to achieve net-zero carbon emissions by 2050. It has established a comprehensive set of actions to achieve its GHG reduction targets within the specified timeframe. These measures explicitly address the primary sources of GHG emissions, including Scope 3 emissions where relevant. It is in the process of developing a methodology to collect data on Scope 3 emissions.

ESG Unbundled

Overall ESG Score: 3.1 (out of 4)
Last Updated: 20 May 2025

E Score: 3.0 (GOOD)

INRI advocates green development to align with the Climate Governance Malaysia target to reduce global warming and achieve net zero by 2050. by implementing energy-efficient projects to mitigate GHG emissions, and boost water and waste management. It is a listed Task Force on Climate-Related Financial disclosures (TCFD) support and is adhering to the standards, guidelines and framework of the United Nations Sustainable Development Goals (UNSDGs) and Global Reporting Initiatives (GRI).

S Score: 3.3 (EXCELLENT)

INRI complies with all applicable labour laws in countries it operates in. Its occupational safe and health policy ensures employees are protected from any occupational risks. It makes consistent effort to improve the wellbeing and living standard of surrounding communities.

G Score: 3.0 (GOOD)

INRI is committed to the principles and best practices of corporate governance as laid out in Bursa Malaysia’s listing requirements and Malaysian Code on Corporate Governance. Its whistleblowing policy promotes standards of ethical conduct, and it has proper channels for whistleblowing. Nevertheless, we note that independent directors comprise less than half of the Board. INRI has yet to achieve the target of having 30% of women on the Board.

ESG Rating History

Chart data unavailable. History shows a consistent rating of 3.1 from Aug-23 to Aug-25.

Financial Exhibits

Financial summary (MYR)

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Recommendation Chart

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