20220817-招银国际-舜宇光学科技-02382.HK-Shipment_guidance_lowered_as_expected__Awaiting_market_recovery_9页_1mb

Sunny Optical (2382 HK) Summary

Core Content

Sunny Optical (2382 HK) is a company that primarily operates in the optical components and optoelectronic products sectors. The company's performance and valuation are under review, with the stock currently trading at HK$120.50 and a target price (TP) of HK$102.30, indicating a potential downside of 15.1%.

The company has lowered its shipment guidance for 2022, with HLS (Handset Lens Sets) expected to decline by 15% YoY and HCM (Handset Camera Modules) by 20% YoY. However, the outlook for AR/VR and auto lens/cam modules is positive, with AR/VR expected to grow 50% YoY in 2022 and auto camera module revenue guided at RMB10bn.

Main Points

• Shipment Guidance:

  • HLS: Down 15% YoY in 2022, implying a further decline of -21% in 2H22E.
  • HCM: Down 20% YoY in 2022, with a stabilization expected in 2H22E.
  • VLS (Vehicle Lens Sets): Up 10-15% YoY in 2022, indicating accelerated growth in 2H22E.

• Revenue and Profit Trends:

  • Revenue: Expected to decline by 8.7% in FY22E, then grow by 14.3% in FY23E and 14.6% in FY24E.
  • Net Profit: Expected to decline by 45.0% in FY22E, but grow by 47.7% in FY23E and 19.9% in FY24E.
  • EPS (Earnings Per Share): Trimmed by 11-22% for FY22-24E, with new estimates 27-35% below consensus.
  • P/E Ratio: Trading at 41.6x FY22E and 28.2x FY23E P/E, which is considered fairly valued.
  • P/B Ratio: Trading at 4.9x FY22E and 4.3x FY23E P/B.

• Key Risks:

  • High exposure to the handset segment (79% of sales), which could negatively impact earnings due to smartphone slowdown and macroeconomic uncertainties.
  • Continued destocking by Android manufacturers in 2H22E.

• Opportunities:

  • AR/VR: Expected to see 50% YoY revenue growth in 2022, with more potential in VR products.
  • Auto Lens/Cam Module: Guided for RMB10bn revenue, driven by increasing order wins for LiDAR and AU-HUD products.
  • Product Roadmap: Continued focus on next-gen handset camera products and vehicle camera opportunities.

Financial Highlights

Valuation and Target Price

• Valuation Methodology:

  • The target price of HK$102.3 is based on SOTP (Sum of the Parts) valuation, using a weighted-average P/E multiple of 23.0x on FY23E EPS.
  • SOTP Valuation Breakdown:
    • Camera Modules: 36.6% of FY23E profit, target P/E of 15x.
    • Handset Lenses: 45.3% of FY23E profit, target P/E of 25x.
    • Vehicle Lenses: 16.5% of FY23E profit, target P/E of 35x.
    • Others: 1.6% of FY23E profit, target P/E of 25x.
    • Total Implied P/E: 23.0x.

• Peer Comparison:

  • Sunny Optical is compared with other companies, with its TP at 23.0x FY23E P/E, lower than the average P/E of peers.

Share Performance

• Market Cap: HK$132,188.5 million.
• Average 3-Month Turnover: HK$115.0 million.
• 52-Week High/Low: HK$252.60 / HK$95.30.
• Total Issued Shares: 1,097.0 million.

Shareholding Structure

• Sun Xu Ltd: 35.5%
• JP Morgan Chase & Co: 4.9%

Key Risks and Outlook

• Market Recovery: Awaiting recovery in the market, especially in the handset segment.
• Technology Leadership: Strong product roadmap and technology capabilities.
• Growth Potential: Positive outlook for AR/VR and auto business, despite challenges in the handset segment.
• Valuation: The stock is considered fairly valued, with a target price of HK$102.3.

Summary of Financial Assumptions

• Shipment Volume:

  • Handset Lens Sets: Expected to decline by 15% in FY22E.
  • Vehicle Lens Sets: Expected to grow by 13% in FY22E.
  • Handset Camera Modules: Expected to decline by 20% in FY22E.
  • Other Optoelectronic Products (3D Sensing): Expected to grow by 18% in FY22E.

• Gross Margin:

  • Optical Components: Expected to decline to 19.8% in FY22E.
  • Optoelectronic Products: Expected to decline to 10.3% in FY22E.
  • Optical Instruments: Expected to remain stable at 39.2% in FY22E.

• Operating Margin:

  • Optical Components: Expected to decline to 10.1% in FY22E.
  • Optoelectronic Products: Expected to decline to 12.5% in FY22E.
  • Optical Instruments: Expected to remain stable at 12.6% in FY22E.

• Net Margin:

  • Optical Components: Expected to decline to 8.0% in FY22E.
  • Optoelectronic Products: Expected to decline to 10.3% in FY22E.
  • Optical Instruments: Expected to remain stable at 10.8% in FY22E.

Conclusion

Sunny Optical faces a challenging environment in the handset segment, with shipment guidance cuts and declining gross margins. However, the company is well-positioned in emerging markets such as AR/VR and auto camera modules, which are expected to drive growth. Despite the downward revision in earnings estimates, the stock is deemed fairly valued based on SOTP valuation and current P/E ratios. The recommendation remains HOLD, with a revised target price of HK$102.3.