20220310-招银国际-舜宇光学科技-02382.HK-Headwinds_not_fully_priced_in__Maintain_Hold_8页_1mb

Sunny Optical (2382 HK) Company Update Summary

Core Content Overview

This report provides an equity research update on Sunny Optical (2382 HK), focusing on its financial performance, earnings revisions, valuation, and market outlook. The report highlights the company's challenges and opportunities across different business segments, with a recommendation to maintain a HOLD position due to headwinds and stretched valuations.

Main Points

Current Recommendation

• Rating: HOLD
• Target Price (TP): HK$140.5 (down from HK$210.1)
• Current Price: HK$144.8
• TP Change: -3% from current price

Key Challenges

1. Headwinds:
   • Sluggish HCM/HLS shipment growth in 1H22E
   • Weaker Android demand following the iPhone SE 5G launch
   • Margin pressure due to lower utilization and increased competition
2. Earnings Outlook:
   • 1H22E: 10% growth in HCM, 3% growth in HLS, with a 4% and 5% ASP decline respectively
   • 2H21E: Revenue and net profit expected to decline by 6% and 22% YoY
   • Consensus estimates for FY22E and FY23E EPS growth are considered too aggressive

Earnings Revisions

• EPS Growth:
  • FY22E: 9.1% (vs consensus 24.0%)
  • FY23E: 21.8% (vs consensus 24.9%)
• Margin Trends:
  • FY22E GPM estimated at 24.0% (vs consensus 24.4%)
  • OPM and NPM are also lower than consensus due to margin pressure

Valuation Analysis

• Current P/E (FY22E): 23.5x
• SOTP-based TP: HK$140.5, implying 22.8x FY22E P/E
• Valuation Approach:
  • Weighted average P/E multiple applied across business segments
  • Lower P/E assigned to CCM business due to its China No.1 position and product upcycle
  • Higher P/E assigned to vehicle lens business due to high growth and margin

Financial Highlights

Revenue Trends

• FY19A - FY23E:
  • FY19A: RMB 37,849 million
  • FY20A: RMB 38,002 million
  • FY21E: RMB 37,753 million
  • FY22E: RMB 39,348 million
  • FY23E: RMB 45,039 million
• Growth Rate (YoY):
  • FY19A: 46.0%
  • FY20A: 0.4%
  • FY21E: -0.7%
  • FY22E: 4.2%
  • FY23E: 14.5%

Net Profit Trends

• FY19A - FY23E:
  • FY19A: RMB 3,991 million
  • FY20A: RMB 4,882 million
  • FY21E: RMB 5,128 million
  • FY22E: RMB 5,596 million
  • FY23E: RMB 6,818 million
• Growth Rate (YoY):
  • FY19A: 60.2%
  • FY20A: 22.3%
  • FY21E: 5.1%
  • FY22E: 9.1%
  • FY23E: 21.8%

Margin Trends

• Gross Margin (GPM):
  • FY19A: 20.5%
  • FY20A: 22.9%
  • FY21E: 24.2%
  • FY22E: 24.0%
  • FY23E: 24.9%
• Operating Margin (OPM):
  • FY19A: 12.7%
  • FY20A: 15.5%
  • FY21E: 16.4%
  • FY22E: 16.9%
  • FY23E: 17.9%
• Net Margin (NPM):
  • FY19A: 10.5%
  • FY20A: 12.8%
  • FY21E: 13.6%
  • FY22E: 14.2%
  • FY23E: 15.1%

Business Segment Analysis

Shareholding and Stock Performance

Shareholding Structure

• SUN XU LTD: 35.47%
• JPMORGAN CHASE: 5.73%
• WENJIAN WANG: 3.04%

Stock Performance

• 1-Month: -27.7% (Absolute), -13.0% (Relative)
• 3-Months: -41.2% (Absolute), -30.8% (Relative)
• 6-Months: -37.9% (Absolute), -22.5% (Relative)

Peer Valuation Comparison

Conclusion

Despite the company's long-term growth potential, current valuations are considered stretched due to the 9% EPS growth forecast for FY22E and the headwinds impacting its performance. The report recommends taking profit on any stock rebound before the results on 23 Mar, with a HOLD rating. The new TP of HK$140.5 is based on a SOTP valuation model and reflects the diversified business segments and product upcycles. The company is expected to benefit from long-term trends, but short-term challenges remain.