INARI: Semiconductor Firm’s FY25 Core Profit Dips, But Strong Q4 and New Device Cycle Offer Future Promise
| Investment Bank | PUBLIC INVESTMENT BANK |
|---|---|
| TP (Target Price) | RM2.22 (+12.1%) |
| Last Traded | RM1.98 |
| Recommendation | Neutral |
While full-year 2025 (FY25) core profit registered a 15.8% year-on-year decline to RM261.2 million, a leading outsourced semiconductor assembly and test provider managed to marginally surpass both internal and street expectations. The firm’s fourth quarter of FY25 (4QFY25) demonstrated resilience, with core earnings improving by 8.4% year-on-year to RM64.2 million, primarily driven by enhanced cost efficiencies.
Performance Highlights
The annual decline in core profit was primarily attributed to weaker sales contributions across all core segments and a RM16.1 million start-up loss from its 54.5%-owned Yiwu Semiconductor International Corp (YSIC). In 4QFY25, despite the core earnings improvement, the company’s topline experienced a 7.9% year-on-year slip, dropping from RM333.1 million to RM306.7 million. This was largely due to lower loading volumes from all key segments, including radio frequency, optoelectronics, and generic, which saw declines of 7.1%, 8.8%, and 12% year-on-year respectively. The improved gross margin from 19.1% to 21.1% in 4QFY25 was a key factor in boosting quarterly earnings.
Outlook and Growth Drivers
Looking ahead, the market anticipates a significant catalyst with the expected unveiling of a new US smartphone model on September 9th. This device is poised to introduce a new, skinnier design, along with a larger display and improved camera capabilities, marking it as the first “wholly new design in years.” While potential drawbacks like shorter battery life and a single rear camera are noted, this launch is seen as the commencement of a three-year overhaul for the smartphone lineup, with a foldable version expected next year.
Key re-rating catalysts that could further bolster the firm’s prospects include a boost in upcoming smartphone sales, expansion of market share in China and India, an earlier-than-expected turnaround for the China-based YSIC, and increasing contributions from advanced packaging in optoelectronics. Public Investment Bank maintains a Neutral recommendation on the stock, with an unchanged target price (TP) of RM2.22, representing a 12.1% upside from its last traded price of RM1.98.
