Inari Amertron Bhd (INARI) is positioned to expand into China's recovering smartphone market while capitalising on the roll-out of AI-capable smartphones.

The company is strategically prepared to benefit from the increasing demand for high-bandwidth optoelectronic devices and data centers which are critical to support the growing market. Its Radio Frequency (RF) segment, expected to contribute 59%-63% of FY25F-FY26F revenue, will be a key driver benefiting from the upgrade cycle sparked by AI-capable smartphones.

The company's 54.5%-owned YSIC-JV with a plant in Yiwu, is positioned to tap into China's growing smartphone market, which saw an 8.9% YoY increase in 2QCY24 shipments. INARI is aiming for RMB1b revenue from its China unit based on earlier understanding.

It's FY25 outlook remains promising, driven by key trends in AI and trade-war tariffs that are reshaping the tech industry.

Nevertheless, INARI's FY25/FY26 net profit forecasts have been lowered by 15%/8%, respectively, reflecting the impact of margins that were compressed due to higher input costs (expansion and new product development) as seen in the soft FY24 results.

Analysts have also adjusted INARI's target price to RM4.05 while maintaining their OUTPERFORM call. As at 12:00 noon, INARI's stock traded at RM3.09. (Google-hosted Bursa updates)

Overall, INARI is favoured for being the closest proxy to 5G adoption as well as being highly responsive to the market demand with the roll-out of new technologies, and undertaking significant expansion in China.