Events:
Sunny Optical Technology released its H1 financial report in 2022, with revenue of 16972 million yuan (YoY-14%), gross profit of 3522 million yuan (YoY-29%) and net profit of 1358 million yuan (YoY-49%).
Our view:
Overall performance: due to external adverse environmental factors, H1 revenue in 2022 was lower than expected, down 14% from the same period last year; gross profit was higher than expected, down 29% from the same period last year; and home net profit was lower than expected, down 49% from the same period last year. The company continues to increase its R & D investment to achieve long-term growth, waiting for the mobile phone and vehicle business to recover.
Operating performance: the company's mobile phone lens, mobile phone module, car lens all remain the first in the world, with a clear lead. In the mobile phone business, due to the weak demand for smartphones and reduced camera configuration, shipments of H1 mobile phone lenses and mobile phone modules fell to 652 million (YoY-9.1%) and 289 million (YoY-19.2%) respectively in 2022. In the vehicle business, affected by the structural lack of core in the supply chain, H1 car lens shipments increased slightly by 0.8% to 37.61 million pieces in 2022.
Mobile phone business: the demand for mobile phones is weak and the downgrade of cameras continues, and shipments of mobile phone lenses and mobile phone modules are expected to remain under pressure periodically. In terms of mobile phone lenses, the smooth progress of Apple Inc's order has brought structural benefits. H1 shipments of 6p and above mobile phone lenses increased by 20% to 196 million pieces in 2022 compared with the same period last year. At the same time, the company completed the "ultra-thin and ultra-small head mobile phone lens" suitable for folding mobile phones. In terms of mobile phone modules, the company continues to invest high R & D investment to seek a breakthrough in differentiation. In 2022, H1 Company completed the research and development of the first in-focus mobile phone camera module in the industry. At the same time, the advantages of self-developed equipment are highlighted, and the level of automation is constantly improving. can improve production efficiency, reduce costs, reduce cost pressure under price competition.
Vehicle business: the problem of lack of core in the automobile supply chain is gradually alleviated, and the company's on-board lenses and modules are expected to meet volume growth in the second half of the year. The company is firmly committed to the research and development of high-end products, and in 2022, H1 has completed a number of 5-megapixel glass-plastic hybrid cabin monitoring vehicle lenses, and has won the cooperation of platform projects from a number of car factories. The car module company has an initial launch of 8 million pixels and ranks first in the industry. at present, the company has a significant advantage in technology and customer resources, and the upgrading of intelligent driving ushered in a rise in volume and price. In addition, the company's multi-technical route layout of lidar and HUD is expected to bring a new increase in revenue.
XR business: XR has a broad market prospect, and the company has a significant optical first-mover advantage. In 2022, H1, the company completed the research and development of AR optical projection lens, and realized the mass production of a new generation of VR spatial positioning lens and VR pancake module. As a leading manufacturer of traditional optics, Sunny Optical has a full understanding of the key process of pancake polarizer and high precision of optical calibration assembly, which takes the lead in the trend of thinning of VR head. In addition, Sunny Optical set up a subsidiary Shun Wei Technology, United Netxin Group, Hong soft and other cutting-edge technology companies, with the goal of becoming the top ODM company in the XR machine manufacturing industry.
Profit forecast and investment rating: in view of the current downturn in mobile phone consumption and the continuation of camera downgrade, coupled with a structural lack of core in the automobile supply chain, we have lowered the company's revenue for the fiscal year 2022-2024 by 4%, 5%, 7%, to 323.98, 398.53, and 47.014 billion yuan, respectively, and reduced the company's net profit for the fiscal year 2022-2024, 8% to 46.62 billion, and 5.830 billion yuan, respectively. The corresponding basic EPS is 2.80, 4.25 and 5.31 yuan, respectively, and the corresponding 36.75X/24.18X/19.34X is 36.75X/24.18X/19.34X. Taking into account the recovery of mobile phone consumption and the company's entry into Apple Inc's supply chain, the profitability of mobile phone business continues to optimize, coupled with the broad development prospects and rapid growth of vehicle business and XR business in the future, maintain the "buy" rating.
Risk hints: increased competition in the industry, lower-than-expected progress in businesses such as mobile phones, electric vehicles and VR/AR; geopolitical conflicts leading to supply chain disruptions; technological leapfrogging and subverting the current technological route; and the impact of the epidemic, a drag on economic recovery.