Forecast update: mobile phone business is weak, optimistic about new product-driven growth. We will lower Shunyu's revenue forecast for 2022-2024 by 0%, 2% and 1% respectively, and the net profit forecast by 10%, 0% and 6%, respectively, to reflect the continued weakness of the Android mobile phone market. We believe that the market has fully priced the expectation that shipments of 2H22 mobile lens / camera modules will drop by 20% and 21% compared with the same period last year. We are optimistic that the company's AR/VR and car products will provide growth momentum for 2023. We expect vehicles and AR/VR products to account for 22% of the group's revenue and 40% of the group's net profit in 2023, and will continue to drive the group's performance growth in the future. We have lowered the 2022 Universe 2023 Universe net profit forecast for 2024 to RMB 27.1 Universe 4151,4.81 billion respectively. We reaffirm our "buy" rating and give the target price of HK $140 (previous value: HK $120) based on the SOTP valuation method.
On-board products: driving the sustainable growth of future performance
We expect shipments of 2H22 lenses to grow by 28% year-on-year, while the average price will be the same as gross margin or month-on-month. At the 1H22 results meeting, Shunyu reiterated the sales guidance of 1 billion yuan for vehicle camera modules in 2022, and said that as some projects have started mass production, the revenue related to 1H22 LiDAR and HUD optical components has also increased significantly compared with the same period last year. We believe that as ADAS penetration continues to increase, Shunyu will take advantage of its leading position in the optics industry to win orders for new products such as cameras, LiDAR, HUD and so on. In 2023, sales / net profit of vehicle products will account for 15% of the group's total. 36%.
AR/VR: high-end VR terminal is about to be released, management guidance 2022 sales may increase 50% year-on-year in the 1H22 performance presentation, management reiterated the 2022 AR/VR-related products sales growth of 50% year-on-year guidance. We think the main driver is the high average price of the Pancake module and camera used in the upcoming Meta QuestPro. We are optimistic about the long-term growth potential of Shunyu AR/VR products and its leading position in Pancake solutions, optical waveguides and cameras.
Mobile phone: 2H22 is expected to perform poorly. At the end of the year, the mobile phone brand goes out of inventory or ends. We expect the shipments of Shunyu 2H22 mobile phone camera module / lens to decline by 21% and 20% respectively compared with the same period last year. The average price is the same as the previous month. The gross profit margin of the mobile lens remains unchanged, but the gross profit margin of the mobile camera module may fall below 10%. We expect mobile phone manufacturers to end inventory by the end of the year. In view of the low base in 2022 and the continued expansion of Shunyu's mobile lens and mobile camera module in Apple Inc and Samsung, we expect shipments to achieve a year-on-year growth of 3% and 9% respectively in 2023.
Reiterate "buy" and raise the target price to HK $140
We will downgrade the 2022 / 2023 / 2024 EPS forecast by 10% / 0% / 6% respectively to reflect the weak smartphone demand. We have estimated the target price of HK $140based on the SOTP valuation method, including HK $39 per share for car lens business, HK $8 per share for car camera module business, HK $9 per share for AR/VR business, HK $31 per share for mobile camera business, HK $30 per share for mobile camera module business, and HK $23 per share for other businesses. Our target price corresponds to 31 times 2023 PE.
Risk hint: competition intensifies; ADAS and AR/VR penetration rates of electric vehicles are lower than we expected.