Shunyu Investor Day: Artificial intelligence may drive the next wave of switching
Shunyu Optical Technology (Shunyu) held 2024 Investor Day on June 18. The company raised the 2024 global smartphone shipment growth forecast from 1.7% to 3.5%, and lowered the Chinese market growth forecast from 1.1% to 0.4%. The company did not comment further on the guidelines announced during the 2013 Annual Report (mobile phone lenses increased 5% year over year, mobile phone camera modules remained flat year over year, car lenses increased 10% to 15% year over year). We believe that as can be seen from this investment day event, the company showcased a strong product portfolio covering the smartphone, automotive, smart home, and AR/VR fields, and it is recommended to pay close attention to the potential impact of visual input+edge artificial intelligence on mobile/vehicle/XR related businesses. We maintain our 2024/25/26 net profit forecast of RMB 16.27/20.17/RMB 2,438 billion. We calculated a target price of HK$60 based on the SOTP valuation method, reaffirming the “buy” rating.
How will Sunwoo benefit from the trend of artificial smartphones?
Sunyu's management emphasized that the company may benefit from the trend of artificial smartphones in terms of input hardware such as cameras and other sensors, as well as output hardware such as robots and VR. At the same time, the push for vision and AI at the edge may accelerate the spread of smart cars and the penetration of multiple sensors (such as lenses). Furthermore, artificial intelligence may promote XR as a next-generation productivity tool and promote the popularity of XR terminals.
Car lens: strong product layout to maintain market leadership
In an increasingly competitive market, Sunyu continues to develop and innovate in advanced vehicle assistance driving system (ADAS) sensing lenses, and has achieved technological breakthroughs in hybrid ADAS vehicle modules, enhancing market competitiveness. Currently, the technology has penetrated 80% of the world's mainstream electric vehicles.
In terms of lens modules, Sunyu's 8 million vehicle camera module shipments continue to expand in overseas markets, and the product portfolio covers various aspects such as sensing, imaging, and cabin monitoring modules. In terms of new products, the revenue of head-up display image generation units increased by more than 100% in 2023. Many projection headlamp products have already been mass-produced, and the market penetration rate has increased significantly.
Global/Chinese smartphone shipments will increase by 3.5%/0.4% in 2024 Shunyu adjusted its 2024 global/Chinese smartphone market forecast to 3.5%/0.4%, +1.8/-0.7pp compared to the previous forecast. The company believes that as mobile terminal sales rebound from bottom in 2023, combined with the rapid development of artificial intelligence, market demand for mobile phones is expected to grow moderately in the next few years.
Maintain target price of HK$60 and “buy” rating
We maintain our 2024/25/26 net profit forecast of RMB 16.27/20.17/RMB 2,438 billion. We calculated a target price of HK$60 based on the SOTP valuation method, corresponding to a valuation of HK$28.8 per share for the automotive business, HK$12.8 per share for the AR/VR business, HK$5.2 per share for the mobile business, and HK$13.1 per share for other businesses. Our target price corresponds to 36 times the 2024 forecast PE. Reiterate the “buy” rating.
Risk warning: competition intensifies; the electric vehicle industry is developing slower than we expected.