Major updates
Sunny Optical Technology (Shunyu) releases August shipping data. Shipments of mobile lens / camera modules (CCM) fell 26.2% and 30.0% respectively from a year earlier, mainly because demand for Android smartphones is still weak and manufacturers are still digesting excess inventory. We see that the main positive comes from the sustained marginal recovery of car lenses, with shipments (about 7 million, an increase of 9.4% month-on-month, a year-on-year increase of 29.0%) approaching the all-time high of 7.3 million in January 2021. We expect shipments of smartphone-related products from 2H22 to be weak and maintain "buy" taking into account the growth rate of ARVR and in-car products, with the 2022max 2023 / 2024 EPS forecast of RMB 2.47max 3.79max 4.39 and a target price of HK $140based on SOTP.
Car lens: shipments increased by 9.4% month-on-month and 29.0% year-on-year. Shunyu August car lens shipments increased by 9.4% month-on-month and 29.0% year-on-year to about 7 million. We have seen the car lens business continue to pick up slightly month-on-month, with August shipments approaching the all-time high of 7.3 million in January 2021. Retail sales of passenger cars in China rose 28.9% year-on-year and 2.9% month-on-month in August, according to the Federation of passengers. We believe that the improvement in ADAS penetration continues, the company's leading position is solid, and the company is expected to maintain a steady year-on-year growth rate in 2H22 with a low shipping base last year.
Mobile phone lens: shipments fell 26.2% year-on-year, up 3.9% month-on-month. Shunyu mobile phone lens shipments reached 92.6 million in August (down 26.2% from a year earlier, up 3.9% from a month earlier).
We think Apple Inc's new project is driving month-on-month growth. By contrast, sales of 3008 TT were up 10.7 per cent year-on-year, while sales of 3406 TT were up 24.2 per cent. We expect that demand for 2H22 Android smartphones will remain weak and manufacturers will continue to stock them.
Mobile CCM: 30% lower than the same period last year, up 5.2% from the previous year
Shunyu's mobile phone CCM shipments in August were 38.7 million (down 30 per cent from a year earlier and up 5.2 per cent from a month earlier).
We expect Shunyu's main customers to continue to inventory, and the industry will remain highly competitive.
Maintain a "buy" rating with a target price of HK $140
We maintain the 2022 2023 EPS 2024 forecast of RMB 2.47max 3.79max 4.39. We get the target price of HK $140based on the SOTP valuation method. The target price corresponds to a valuation of HK $39 per share for car lens, HK $8 per share for car CCM, HK $9 per share for AR/VR, HK $31 per share for mobile lens, HK $30 per share for mobile CCM, and HK $23 per share for other businesses. Our target price corresponds to 31 times the 2023 forecast PE. Reiterate the "buy" rating.
Risk hint: competition intensifies; the development of the electric vehicle industry is slower than we expected.