20230328-招银国际-舜宇光学科技-02382.HK-NDR_takeaways__a_bumpy_1H23_ahead__Auto_VR_AR_business_to_drive_long-term_growth_7页_1mb

Sunny Optical (2382 HK) Summary

Core Content and Business Outlook

Sunny Optical, a leading optical components manufacturer, faced a challenging 1H23E due to the camera de-spec trend, which put pressure on ASP (average selling price) and GPM (gross margin percentage) for its handset-related products. Despite this, the company remains optimistic about long-term growth, driven by three key areas:

1. Smartphone Replacement Cycle: Demand is expected to recover in 3Q23E, which could lead to improved performance.
2. AR/VR Growth: Revenue from AR/VR is projected to grow by 30% YoY in FY23E, reflecting strong demand in this emerging sector.
3. ADAS Adoption: The increasing adoption of ADAS (Advanced Driver Assistance Systems) in key markets like Europe, the US, Japan, and South Korea is anticipated to drive ASP and GPM upside in FY24-25E.

Financial Highlights (FY21A to FY25E)

Key Risks and Valuation

• 1H23E Challenges: Limited order visibility and inventory correction in the smartphone segment.
• Valuation: The stock is trading at 28.1x / 24.3x FY23/24E P/E, which the analysts consider fairly valued.
• Target Price (TP): Maintained at HK$86.75, based on a SOTP (Sum of the Parts) valuation model.
• P/E Assumptions:
  • 18x for its Camera Module (CCM) business, reflecting its leadership and product upcycle.
  • 25x for its Handset Lenses segment, due to secular upgrade trends and share gains.
  • 35x for its Vehicle Lenses business, given its high-margin and high-growth nature.

Business Segments and Revenue Drivers

• Handset Lens Sets: Expected 3% YoY shipment growth in FY23E, with ASP under pressure.
• Vehicle Lens Sets: Projected 19% YoY shipment growth in FY23E, with stable ASP and GPM.
• Handset Camera Modules: 7% YoY shipment growth in FY23E, with declining ASP due to de-spec trend.
• Other Optoelectronic (3D Sensing): 7% YoY shipment growth in FY23E.
• Microscopic Instruments: 10% YoY shipment growth in FY23E.

Analyst Recommendation

• Rating: HOLD
• Target Price: HK$86.75
• Upside/Downside: -7.9%

Shareholding and Stock Performance

• Shareholding Structure:

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

• Stock Data:

  • Market Cap (HK$ mn): 103,337.4
  • 52-Week High/Low (HK$): 137.00 / 67.55
  • Total Issued Shares (mn): 1,097.0

• Share Performance (3Mths):

  • Absolute: 3.4%
  • Relative: 3.5%

Earnings Forecasts and Assumptions

• SOTP Valuation: Implies a 24.5x FY23E P/E based on weighted average of segment-specific P/E multiples.
• Key Assumptions:
  • Handset Lens Sets: Shipment declined by 42% in FY24E, but expected to stabilize.
  • Vehicle Lens Sets: Shipment declined by 32% in FY24E.
  • Camera Modules: Shipment declined by 100% in FY25E.
  • Optoelectronic Products: Expected to see 3% YoY growth in FY23E.
  • Optical Instruments: Expected to see 10% YoY shipment growth in FY23E.

Peer Comparison

Key Takeaways

• The company is fairly valued at current P/E levels.
• Auto, VR/AR, and ADAS are key growth drivers for the long term.
• Handset business faces short-term challenges due to de-spec trend and inventory correction.
• The SOTP-based TP of HK$86.75 reflects the company's diversified business model and growth potential.
• Market Cap is HK$103,337.4 million, with dividend yield expected to rise to 2.0% by FY25E.