Sunny Optical (2382 HK) Equity Research Summary
Core Content
Sunny Optical is a leading integrated optical component manufacturer and a primary camera module supplier to top-tier domestic handset brands. The company's financial performance and market position are under review, with a BUY rating maintained despite a minor adjustment to the target price.
Key Points
- Current Share Price: HK$142.00
- Target Price: HK$190.00 (34% increase from previous target of HK$194.00)
- 1H18E Revenue/Net Earnings: Expected to increase by 27% / 25% year-over-year to RMB12,751mn / RMB1,451mn.
- Shipment Growth: Sunny Optical delivered 45.6% / 47.7% / 41.8% of the revised full year target for HLS/HCM/VLS shipments by the end of 1H18.
- Market Share Expansion: The company has experienced faster-than-expected market share gains in HLS and VLS segments, contributing to margin expansion.
- Alliance with Huawei: The firm alliance with Huawei in developing 3D sensing products is a key growth driver.
- Seasonality: The company is expected to benefit from the peak season in 2H18E.
- Risks: Slower shipment growth, lower ASP for lens sets, and political risks from the trade war impacting smartphone components.
Financial Highlights
Revenue and Profit Growth
| Year |
Revenue (RMB mn) |
YoY Growth (%) |
Net Profit (RMB mn) |
YoY Growth (%) |
| FY16 |
14,612 |
37 |
1,271 |
67 |
| FY17 |
22,366 |
53 |
2,902 |
128 |
| FY18E |
29,509 |
32 |
3,724 |
28 |
| FY19E |
36,445 |
24 |
4,969 |
33 |
| FY20E |
44,742 |
23 |
6,666 |
34 |
Earnings Per Share (EPS)
| Year |
EPS (HK$) |
YoY Growth (%) |
| FY16 |
1.400 |
- |
| FY17 |
3.187 |
- |
| FY18E |
4.073 |
-3.3 |
| FY19E |
5.435 |
-2.0 |
| FY20E |
7.292 |
-1.0 |
Profit Margins
| Metric |
FY16 (%) |
FY17 (%) |
FY18E (%) |
FY19E (%) |
FY20E (%) |
| Gross Margin |
18.3 |
21.5 |
21.4 |
22.9 |
24.0 |
| Operating Margin |
10.1 |
15.1 |
14.7 |
15.8 |
17.2 |
| Net Margin |
8.7 |
13.0 |
12.6 |
13.6 |
14.9 |
Valuation Metrics
| Metric |
FY16 |
FY17 |
FY18E |
FY19E |
FY20E |
| P/E (x) |
101.4 |
44.6 |
34.9 |
26.1 |
19.5 |
| P/B (x) |
26.5 |
17.3 |
12.4 |
8.9 |
6.5 |
| Yield (%) |
0.2 |
0.6 |
0.7 |
1.0 |
1.3 |
| DPS (HK$) |
0.323 |
0.812 |
1.038 |
1.385 |
1.858 |
| ROE (%) |
29.1 |
46.9 |
41.4 |
39.8 |
38.7 |
| EBITDA Margin (%) |
11.9 |
16.6 |
16.3 |
17.6 |
18.9 |
| BVPS (HK$) |
5.35 |
8.19 |
11.47 |
15.87 |
21.78 |
Earnings Revision
| Metric |
FY18E |
FY19E |
FY20E |
% Change |
| Shipments (mn pcs) |
1,005 |
1,249 |
1,443 |
6.4 |
| ASP (RMB per pcs) |
6 |
7 |
7 |
- |
| Revenue by segment |
6,232 |
8,136 |
9,903 |
4.0 |
| GPM by segment |
48.9% |
50.7% |
51.6% |
4.1 |
Peer Group Comparison
| Company |
Price (HK$) |
Mkt Cap (US$m) |
3-Month Avg T/O (US$m) |
P/E FY1 (x) |
P/B FY1 (x) |
EV/EBITDA (x) |
Net Margin (%) |
ROE (%) |
| Sunny Optical |
142.00 |
19,848 |
139.2 |
34.9 |
12.4 |
12.38 |
12.6 |
41.4 |
| HSI |
28,181.7 |
- |
- |
11.3 |
1.26 |
- |
- |
11.2 |
| HSCEI |
10,591.72 |
- |
- |
8.1 |
0.93 |
- |
- |
12.1 |
| CSI300 |
3,449.38 |
- |
- |
13.1 |
1.7 |
- |
- |
13.3 |
| Largan Precision |
4,995.00 |
21,961 |
105.6 |
25.1 |
6.98 |
6.30 |
15.2 |
28.5 |
| Genius Elec |
491.50 |
1,607 |
131.4 |
36.1 |
4.5 |
6.00 |
27.5 |
39.5 |
Key Risks
- Slower than expected shipment growth.
- Lower than anticipated ASP for lens sets.
- Political risks due to trade war impacts on smartphone components.
Summary
Sunny Optical is a leading manufacturer of optical components, primarily supplying camera modules to top domestic handset brands. The company is expected to maintain a BUY rating with a revised target price of HK$190.00 based on a 35x FY19E PE. The 1H18E results are anticipated to show strong revenue and net earnings growth of 27% / 25% year-over-year. Sunny Optical has made significant progress in market share for HLS and VLS, and its alliance with Huawei is a major growth driver. Despite some downward revisions in HCM margins due to increased competition, the company's overall performance is projected to remain robust. The financial metrics show consistent improvements in margins and valuation, with the company experiencing a positive trend in EPS and net profit growth. However, potential risks such as slower shipment growth, ASP concerns, and political impacts from the trade war should be considered.
