Inari’s Growth Story: Strong Profits, Weak ROE

Over the past six years, Inari Amertron Berhad has achieved a 4 % CAGR in revenue while PAT grew at a double rate of 8% CAGR.

This stronger PAT growth, however, did not stem from improved cost leverage or margin expansion. As noted in the 2024 annual report, “the Group’s administrative expenses rose in line with revenue,” indicating no significant improvement in fixed cost efficiency.

Despite growing profits, Inari’s ROE fell from 18% in FY2019 to just 10% in FY2024. This decline reflects an outsized expansion in capital relative to earnings. For instance, between FY2019 and FY2024, total assets and shareholders’ equity rose at CAGR of 18 % –19%, well above the 4% revenue CAGR.

The company’s growth trajectory is also marked by a high concentration of revenue from a single customer. As disclosed: “approximately 90% of the Group’s revenue is derived from one major customer.”

This underscores a key investment risk, especially in a sector where technological shifts and client decisions can swiftly alter demand.

Taken together, Inari exhibits the financial strength typical of companies in the Gem quadrant of the Fundamental Mapper. However, its declining ROE and high customer concentration suggest elevated investment risk, even in the presence of profit growth.