20160315-法国巴黎银行-舜宇光学科技-02382.HK-Solid_result,_positive_outlook_13页_522kb

Summary of SUNNY OPTICAL TECHNOLOGY (2382 HK)

Core Content

Sunny Optical Technology is a leading Chinese manufacturer of optical components and products, particularly in the smartphone camera module and vehicle lens markets. The company reported strong performance in the second half of 2015, with a higher-than-expected gross margin (GM) of 17.2% and well-controlled operating expenses (opex). This performance was attributed to increased lens shipments, better technology in higher resolution products, and market share gains in vehicle lenses.

Main Points

• Strong 2H15 Performance:

  • Net sales increased by 30.0% h-h and 31.7% y-y to RMB6,045m.
  • Gross profit reached RMB1,041m (+44% h-h; +43% y-y), with a GM of 17.2%.
  • Operating profit was RMB586m (+81% h-h; +90% y-y), with an OPM of 9.7%.

• Product Mix and Market Share:

  • The company shipped about 300m units of lens sets in 2015, targeting a 20-30% y-y growth in 2016.
  • Expected to increase shipments of 8MP/13MP+ lens sets, which should push its handset lens GM to the higher end of its 35-40% guidance.
  • Estimated market share in Chinese smartphones is around 30%, potentially taking share from Largan in some models due to better local support and improved quality/pricing.

• Dual-Cam Opportunity:

  • Sunny is a key supplier for Huawei, the most aggressive player in dual-camera specifications.
  • The dual-camera trend in China is expected to benefit Sunny significantly, with higher entry barriers supporting its ASP.
  • Continuous pixel upgrades to 13MP (reaching 30-40% in 2016E) are anticipated, which will be positive for its business.

• Investment Rating and Target Price:

  • The investment rating is maintained as BUY, with the target price revised to HKD22 from HKD20.
  • The target PER is unchanged at 18x, applied to FY16/17E average EPS, which is at the mid- to high end of the P/E range of the last three years.
  • Earnings forecasts for 2016/2017E have been revised upwards by 22%/14%, reflecting improved margins and a positive outlook.

• Key Assumptions and Catalysts:

  • Potential catalysts include increased lens shipments in higher megapixel units, better technology in higher resolution products, and market share gains in vehicle lenses.
  • Long-term growth is expected from other applications like VR, 360 cameras, and machine vision.

Key Risks

• Weaker Shipments: If shipments in camera modules and lenses fall below expectations, especially in the higher megapixel segment.
• ASP Declines: Unexpected declines in average selling prices could impact profitability.
• Market Share Losses: Potential losses in vehicle lens shipments due to competition or market shifts.

Company Background

• Industry Position: Sunny is China's leading optical components and products manufacturer, and the largest smartphone camera module producer in the country.
• Major Customers: Huawei, Lenovo, Oppo, Ginoee, and BBK.
• Product Range: Optical components, optoelectronic products, and optical instruments.

Key Executives

Revenue Breakdown (2014)

• Optical Components: 16.6%
• Optoelectronic Products: 80.7%
• Optical Instruments: 2.6%

Event Calendar

Key Assumptions

Earnings Sensitivity

Valuation Comparison

Semi-Annual P&L

Conclusion

Sunny Optical Technology is well-positioned for growth due to its strong performance in 2H15, improved margins, and a strategic focus on higher resolution products and the dual-camera trend in China. The company's investment thesis remains positive, with a BUY rating and a revised target price of HKD22, driven by its strong fundamentals and growth prospects in the optical components market.