20220913-招银国际-舜宇光学科技-02382.HK-Soft_HLS_HCM_in_Aug__Still_awaiting_turning_point_7页_1mb

Sunny Optical (2382 HK) Summary

Core Content

Sunny Optical is a Hong Kong-listed company primarily engaged in the production of optical components and optoelectronic products, with a significant focus on smartphone camera modules and lenses. The report highlights the company's recent performance, market position, and future outlook, particularly in the context of smartphone demand and the potential growth in the auto and AR/VR sectors.

Main Points

• Performance in August:
  Sunny Optical reported a 26% and 30% YoY decline in HLS and HCM shipments, respectively, in August. This is attributed to weak smartphone demand and ongoing Android inventory destocking. Despite this, the VLS shipment increased by 29% YoY, indicating a recovery in some segments.

• Earnings and Valuation:
  The company's earnings per share (EPS) for FY22E and FY23E were below consensus, mainly due to concerns over declining demand in HCM and HLS. The stock is currently trading at 35.9x and 24.3x FY22E and FY23E P/E, respectively, which the report considers fairly valued.

• Target Price and Recommendation:
  The recommendation remains HOLD, with a target price of HK$102.30, based on a SOTP valuation method. The target price reflects a weighted average P/E multiple of 23.0x FY23E EPS, accounting for the company's diverse business segments.

• Positive Outlook for Auto and AR/VR:
  The auto camera module segment is expected to benefit from increased ADAS demand and LiDAR/AU-HUD order wins. The company is guided to achieve RMB10bn in revenue for this segment. The AR/VR segment is projected to grow by 50% YoY in 2022, with strong growth potential in VR products.

Key Information

• Market Exposure:
  The company has a high exposure to the handset segment, which accounts for 79% of total sales. This makes it vulnerable to smartphone inventory destocking and weak demand in the near term.

• Product Roadmap:
  Sunny Optical is noted for its technology leadership and product upcycle potential, particularly in next-gen handset camera products and vehicle lenses. These are seen as key growth drivers in the future.

• Financial Performance:

  • Revenue:
    FY20A: RMB38,002 million
    FY21A: RMB37,497 million
    FY22E: RMB34,253 million
    FY23E: RMB39,141 million
    FY24E: RMB44,853 million
  • Net Profit:
    FY20A: RMB4,950.3 million
    FY21A: RMB5,061.1 million
    FY22E: RMB2,781.6 million
    FY23E: RMB4,109.3 million
    FY24E: RMB4,925.0 million
  • P/E Ratio:
    FY22E: 35.9x
    FY23E: 24.3x
  • P/B Ratio:
    FY22E: 4.2x
    FY23E: 3.7x
  • ROE:
    FY22E: 12.6%
    FY23E: 16.6%
    FY24E: 17.3%

• Earnings Forecast:
  The company's P&L forecast shows a recovery in revenue and gross profit in FY23E and FY24E, with an expected increase in operating and net profit margins as it benefits from product upcycles and increased market share in auto and AR/VR segments.

• Valuation Methodology:
  The SOTP valuation method is used, assigning different P/E multiples to each business segment based on their growth prospects and market position. The weighted average P/E multiple of 23.0x FY23E EPS is used to determine the target price.

Key Risks

• Smartphone Demand:
  Continued weakness in smartphone demand and inventory destocking in the Android segment could drag on the company's performance in the short term.

• High Handset Dependency:
  The company's heavy reliance on the handset segment (79% of sales) makes it vulnerable to market fluctuations in this area.

• Margin Pressure:
  There are concerns about margin pressure in the HCM and HLS segments, which could affect profitability in the near term.

Analysts and Contact

• Analysts:
  • Alex NG: (852) 3900 0881 | alexng@cmbi.com.hk
  • Lily YANG, Ph.D: (852) 3916 3716 | lilyyang@cmbi.com.hk
  • Hanqing LI: lihanqing@cmbi.com.hk

Financial Highlights

• Gross Margin:
  FY22E: 19.7%
  FY23E: 20.9%
  FY24E: 21.5%

• Operating Margin:
  FY22E: 10.1%
  FY23E: 12.5%
  FY24E: 13.1%

• Net Profit Margin:
  FY22E: 8.0%
  FY23E: 10.3%
  FY24E: 10.8%

• Debt to Equity Ratio:
  FY22E: -0.2
  FY23E: -0.2
  FY24E: -0.3

• Current Ratio:
  FY22E: 2.8
  FY23E: 2.4
  FY24E: 2.8

Conclusion

Sunny Optical is currently under pressure due to weak demand in the smartphone sector and high exposure to Android clients. However, the company has a positive outlook for its auto and AR/VR segments, which are expected to drive growth in the future. The stock is considered fairly valued at 35.9x and 24.3x FY22E and FY23E P/E, respectively, and the recommendation remains HOLD. The target price is set at HK$102.30, based on a SOTP valuation model that factors in the company's diverse business segments and their growth potential.