Sunny Optical's March shipments gradually warming up, can the optical industry leader emerge from the "cold winter"?

According to the Zhitong Finance and Economics APP, on April 9th, Sunny Optical Technology (02382) announced the shipment volumes of its major products in March 2024. The shipment volume of mobile phone lenses increased by 33.7% year-on-year to 113 million units, while the shipment volume of mobile phone camera modules increased by 15.1% year-on-year to 41.895 million units, mainly due to the low base caused by weak overall demand in the smartphone market during the same period last year. The shipment volume of car lenses increased by 17% year-on-year to 8.432 million units, mainly due to the company's rising market share in domestic new energy vehicle brands. It is worth noting that on March 20th, Sunny Optical Technology announced its performance for 2023, showing that the company's performance is still on a downward trajectory. The company achieved a revenue of RMB 31.68 billion in 2023, a decrease of 4.6% year-on-year. The gross profit margin was 14.5%, a decrease of approximately 5.4 percentage points from the same period last year. The net profit attributable to the parent company was RMB 1.1 billion, a decrease of 54.3% year-on-year, mainly due to the continued soft global demand for smartphones and the trend of optical reduction and adjustment leading to a year-on-year decline in ASP and gross profit of the company's mobile-related products. After the annual report was released, Sunny Optical Technology's stock price continued to fall for multiple days, with a cumulative decline of over 25%, reaching a new low since April 2017. Subsequently, Dahua Jixian, Goldman Sachs, and Credit Suisse and other major institutions successively lowered their profit forecasts and target prices for Sunny Optical Technology. Dahua Jixian lowered its profit forecast for Sunny Optical for the next two years by 22% to 23%, to RMB 1.881 billion and RMB 2.78 billion respectively, believing that despite the clear recovery trend in the smartphone business, this year's delivery and gross margin guidance are below expectations. The target price was lowered to HKD 63. Credit Suisse lowered its profit forecast and target price from HKD 64.5 to HKD 47.6, maintaining an "underperform" rating. They believe that Sunny Optical's outlook for this year's smartphone and car business is moderate, with a 5% growth target for mobile phone lens shipments, roughly flat estimates for mobile phone lens module shipments, and expected improvements in average selling price and profit margin. As for car lens shipments, the growth target is 10%, slower than the previous year. Goldman Sachs lowered its target price from HKD 69 to HKD 65, and lowered the group's profit forecast for the next two years by 6% and 9%, mainly reflecting the decline in revenue and gross profit. They pointed out that after Sunny Optical released its performance, the management gave a weak guidance for its businesses. While the company's shipments have been stable in the past few months, the competition in the lens and camera module market remains fierce, which may limit long-term growth potential and gross profit recovery. The gross profit margin is expected to gradually improve to 20%, compared to 15% to 20% in the second half of last year. As we enter 2024, the situation in the smartphone market has improved somewhat. From the data released by Sunny Optical this time, we can see that the shipment volume of mobile phone lenses increased by 33.7% year-on-year to 113 million units, and the shipment volume of mobile phone camera modules increased by 15.1% year-on-year to 41.895 million units. However, Sunny Optical also pointed out that this is mainly due to the weak overall market demand during the same period last year, resulting in a low base With the successive release of flagship models such as OPPO Find X7 and Honor Magic6 in the Android camp, the continuous shipment of high-end mobile phone lenses has been driven. Considering the situation where high-end products have a higher number of lenses, TrendForce estimates that the global smartphone camera lens shipments will increase by 3.8% annually in 2024, reaching approximately 4.22 billion units. In a market research brief released in October last year, Guo Mingchi mentioned that Sunny Optical Technology's iPhone lens orders continue to grow, with an estimated opportunity to acquire wafer-level optics technology by 2025, entering the CCM supply chain for iPhone and iPad. Regarding car lenses, as the overall growth rate of the electric smart car market in 2024 is expected to slow down, and influenced by industry pressures and focusing on high-resolution lenses, the company stated that the growth rate of lens shipments will also slow down, with an expected growth of 10.0%. In terms of VR/AR business, the company has achieved mass production of key projects, becoming the preferred supplier for well-known customers, with an expected 15% year-on-year growth in 2024. Industry research reports point out that the rise of new energy vehicles has generated significant demand for optical components, with clear growth opportunities in areas such as LiDAR, intelligent car lights, and in the smart cockpit sector, interior sensing lenses have high technical requirements for R&D companies, presenting opportunities for leading companies. Currently, Sunny Optical's layout in these areas is beginning to show results, but whether these new growth points can revive performance remains to be seen with more observation. It is worth noting that while announcing the shipment volume for March today, Sunny Optical also announced the company's share repurchase plan. On April 8, 2024, based on the general authorization to repurchase shares granted at the annual general meeting of shareholders held on May 24, 2023, the company repurchased a total of 380,000 ordinary shares at the highest, lowest, and average prices of HKD 38.85, HKD 38.60, and HKD 38.7305 per share, respectively. This also seems to convey some positive signals to the outside world, demonstrating management's confidence in the company's future development. Looking ahead, First Shanghai released a research report stating that with the weak recovery of the smartphone market, smooth progress in cooperation with domestic Android customers and overseas major customers, Sunny Optical's shipments and ASP of smartphone-related products are expected to grow; in the automotive field, with the slowdown in market growth, the company may experience a slowdown due to industry pressures and other factors. The bank believes that the main theme of upgrading and improving smartphone optics will continue, and looks forward to the company's volume increase in VR/AR business and stable development in the automotive optical field.