Sunny Optical: A Robust Growth Story with Promising Upside

The latest analysis of Sunny Optical (2382 HK) by UOB Kay Hian delivers a deep dive into the company’s financial performance, future outlook, and investment potential. The report maintains a BUY rating and raises the target price to HK\$100.00, highlighting a 12.9% upside from the current share price of HK\$88.60.

Company Overview

Sunny Optical is a leading player in the design, manufacturing, and sale of optical and optical-related products. Its offerings include glass/plastic lenses, lens sets, camera modules for mobile phones and digital cameras, microscopes, and other analytical instruments. The company operates within the Information Technology sector and boasts a market capitalization of HK\$97,174 million (US\$12,539 million).

2024 Profit Alert: A Solid Earnings Beat

Sunny Optical has issued a profit alert for 2024, forecasting a remarkable 140-150% year-on-year (yoy) growth in earnings. This translates to a net profit of RMB2,639–2,749 million, exceeding UOBKH’s and consensus estimates by 13.5% and 10.3%, respectively. The robust performance is attributed to better-than-expected average selling prices (ASP) and improved margins, particularly in the handset business.

Key Growth Drivers

• Handset Segment: The global smartphone market witnessed a recovery, with shipments rising 6-7% yoy. Sunny Optical’s handset lens sets (HLS) shipments grew by 13% yoy, supported by an enhanced product mix that boosted ASP and margins for both HLS and handset camera modules (HCM).
• Automobile Segment: The rising adoption of new energy vehicles (NEV) and advanced driving assistance systems (ADAS) fueled demand for vehicle lens sets (VLS). Sunny Optical’s VLS shipments also grew by 13% yoy, leveraging its market-leading position in this segment.

Shipment Volume Performance (January 2025)

Sunny Optical’s January 2025 shipment data reflects strong growth trends across several product categories:

• HLS shipment volume grew 2.6% yoy and 1.0% month-on-month (mom) to 105.9 million pieces, representing 7.6% of full-year estimates.
• VLS shipment volume surged 6.5% yoy and 102.0% mom to 12.8 million pieces, accounting for 11.1% of full-year estimates.
• Other lens sets saw a 52.7% yoy and 12.8% mom increase, reaching 11.6 million pieces.
• HCM shipment volume declined by 40.9% yoy and 31.1% mom to 36.8 million sets, representing 6.6% of full-year estimates.
• Other optoelectronic products (e.g., vehicle camera modules, AR/VR sensing modules) grew by 48.2% yoy but declined by 52.0% mom to 3.0 million sets.

Key Financial Metrics

The financial outlook for Sunny Optical from 2024 to 2026 reflects a steady growth trajectory:

• Net Turnover: Expected to rise from RMB39,207 million in 2024 to RMB47,135 million in 2026.
• EBITDA: Forecasted to grow from RMB6,447 million in 2024 to RMB8,174 million in 2026.
• Net Profit: Projected to increase from RMB2,683 million in 2024 to RMB3,622 million in 2026.
• EPS: Anticipated to improve from 245.6 fen in 2024 to 331.7 fen in 2026.

Revised Estimates

UOB Kay Hian has adjusted its 2024-2026 earnings estimates upward by 13.0%, 10.8%, and 10.7%, respectively. These revisions reflect higher ASP and margin assumptions for the handset business, as well as increased shipment estimates for VLS. The forecasted net profits for 2024, 2025, and 2026 are RMB2,683 million, RMB3,283 million, and RMB3,622 million, respectively.

Valuation and Recommendation

UOB Kay Hian maintains a BUY rating for Sunny Optical with a revised target price of HK\$100.00. The valuation is based on a 30.2x 2025F PE, which is 0.5 standard deviations below its five-year average historical forward mean. This reflects the company’s strong performance outlook, supported by the trade-in subsidy program in the smartphone market and advancements in the ADAS segment.

Risks and Future Outlook

While the company shows promising growth prospects, UOB Kay Hian awaits further management guidance during the results briefing in March 2025. The risks to the estimates remain tilted to the upside, given the optimistic trends in the smartphone and automobile markets.