INARI: Earnings Decline Amid Soft Utilization, Strategic Initiatives Underway

A leading semiconductor firm reported a decline in its core profit and revenue for FY25, primarily attributed to softer loadings across its various segments. Despite the financial headwinds, the company is actively pursuing strategic growth initiatives, including robust new product development and a significant proposed acquisition aimed at strengthening its market position and diversifying its customer base.

Performance Review

For the fiscal year ended, the company’s core profit saw a 13.6% decline to RM261.2 million, with revenue also falling 8.6% to RM1,351.9 million. This weaker performance was predominantly a result of lower overall loadings. However, management highlighted a positive trend within the radio frequency (RF) segment, noting an improved quarter-on-quarter utilization rate and production being on schedule for a key flagship smartphone launch by a major end customer.

Driving Growth and Diversification

The company is intensifying its focus on developing new products to create additional revenue streams. In the memory module business, a more aggressive stance has been adopted with a focus on ramping up production. Several new products are currently undergoing qualification assessments, which are expected to boost production loadings. The group has also entered the edge AI package segment and is expanding its optoelectronics and power management capabilities, with the Malaysia plant expecting more than double chip fab assembly output and the Philippines facility seeing increased orders for data center applications. Production for the power management segment at the Philippines facility is slated to commence in 1QCY26 following successful reliability tests.

Strategic Acquisition Poised for Impact

Management reiterated the strategic importance of the proposed acquisition of Lumileds Holding B.V. This deal is viewed as a significant value-creation opportunity, expected to bolster the group’s existing OSAT (Outsourced Semiconductor Assembly and Test) capabilities through collaborations with Sanan and Lumileds. Furthermore, the acquisition is anticipated to diversify the customer base and provide immediate access to a global network. The transaction is projected to be completed by 3QFY26, with management expressing confidence in their ability to turn around the acquired business.

Analyst Outlook

TA Securities, in its latest report dated September 02, 2025, has upgraded the stock from Sell to Hold, maintaining an unchanged target price of RM2.11. This adjustment follows recent weakness in the company’s share price and reflects a view that the company’s long-term prospects remain intact, supported by the ongoing strategic initiatives and the expected benefits from the Lumileds acquisition.