0166 INARI had released its Q3 2021 quarterly report on 21-May-2021. For record INARI is the only technology counter in my portfolio as of now. Let's look into the detail of the QR. 0166 INARI Q3 2021 report
Full announcement here:
https://disclosure.bursamalaysia.com/FileAccess/apbursaweb/download?id=214005&name=EA_FR_ATTACHMENTS
Snapshot:
As expected, INARI did extremely well this quarter compared to last year's Q3 (revenue +41%, net profit +133%), but the revenue and net profit drop 9% compared to the preceding quarter.
As of Q3 2021, INARI is sitting on RM 885 mil of cash, a RM 275 mil (+45%) increase, with minimal borrowings. Receivables and payables were more or less the same.
As of Q3 2021, INARI recorded a massive positive RM 291.5 mil cash flow, with 47% of it came from the proceeds of ESOS. Net cash from operating activities remains healthy at RM 347 mil, meaning there is no problem on payment collection.
Company's review on Q3 performance:
Company update on the future prospect:
My personal takeaways on INARI's Q3 2021 report:
1. Despite the fact that Q3 normally is a weaker seasonal quarter for INARI, it managed to record another stellar quarter with RM 81.9 mil net profit, with a healthy profit margin at 23.9%. This reflects that the RF business segment commands premium selling price. For FY2021, INARI recorded a total net profit of RM 242.1 mil in 3 quarters, which is already 55% higher than the entire FY2020, and looks almost certain will break its all time high net profit of RM 249.3 mil recorded in FY2018. I conservatively estimate a RM 60 mil net profit for Q4, which will bring the total net profit for FY2021 to RM 300 mil, equivalent to EPS RM 0.09. This translates to a 28.1x PER with the share price of RM 3.20.
You can find the net profit estimates from various investment banks below:
Hong Leong Investment Bank: Net profit: RM 309 mil; EPS RM 0.092
Kenanga Research: Net profit: RM 208.5 mil; EPS RM 0.084
Public Investment Bank: Net profit: RM 298.6 mil; EPS RM 0.089
Amivnest: Net profit: RM 316.8mil; EPS RM 0.095
2. The 22 SiP lines was fully operational in Q3 2021, supported by the resilient demand for its RF chips. The company was optimistic about the growth in RF chips demand will continue into FY2022, supported by the possible launching of next generation smartphone in 2H2021 by its indirect client, Apple (INARI's major client is Broadcom, who is the supplier of Apple). INARI also announce its intention to further ramp up the production capacity for its RF segments to fulfil the demand.
3. The optoelectronics segment sees some improvement in the loading for its automotive and industrial divisions for up to 6 months. This is great for diversification so that INARI will not be too reliant on the RF segment.
4. Encouraging development on possible new customers. According to Kenanga Research, INARI is in good chance to secure 2 MNC customers, with Aminvest reported more insight regarding the latest development. New customers means new income stream. The proposed private placement will come in handy as the fund can be utilized for the new production lines for the new customers.
5. Surprised special dividend announcement. On top of the RM 0.022 (89% of the net profit) interim dividend for Q3 2021, INARI also announced a special dividend payout of RM 0.018, both ex-date on 8-JUNE-2021. This brings the total dividend payout for 3Q to RM 0.085, representing a 3Q dividend yield of 2.66% (against share price of RM 3.20). Assuming another RM 0.02 dividend for Q4, full year dividend payout will be RM 0.105, DY at 3.28%.
Analyst reports regarding INARI's Q3 2021 report:
Hong Leong Investment Bank; BUY - TP RM 3.81; 35x CY2022 FD EPS:
Kenanga Research; OUTPERFORM - TP RM 4.00; 40x PER FY2022E:
Public Investment Bank; OUTPERFORM - TP RM 4.40; 45x PE:
Aminvest; BUY - TP RM 3.11; 28x CY2021F PE:
Disclaimer: This is a personal opinion recorded for my personal record. Nothing on this Blog constitutes investment advice, performance data or any recommendation that any security, portfolio of securities, investment product, transaction or investment strategy is suitable for any specific person. The author shall not be held accountable for any investment decision made by the reader. Invest at your own risk.
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