Incident: Sunyu Optics released its 2024 semi-annual report. In the first half of 2024, the company achieved revenue of 18.86 billion yuan, +32% year over year, gross profit margin of 17.2%, +2.3 pcts year on year, and net profit of 1.08 billion yuan to mother, +147% year over year, exceeding the forecast median value of 1.07 billion yuan.

Mobile phones: High-end results, increased ASP and gross margin

24H1's mobile phone-related product revenue was 13 billion yuan, +34% year over year, of which 1) mobile phone lens shipments were 0.63 billion pieces, +24%, of which 6P and above products shipped 0.16 billion pieces, +23% year-on-year, and ASP increased by more than 20% year over year. The company continued to promote product structure improvements. The gross margin of 24H1 mobile phone lenses increased to about 20%. The company's multiple one-inch glass-plastic hybrid cameras, similar to surface diving Vision products have been mass-produced, multiple groups of periscope mobile phone lenses have been developed, and mobile lens shipments are expected to increase by 5-10% year-on-year in 2024.

2) Mobile phone camera module shipments were 0.29 billion units, +14%. Among them, Periscope and large image module shipments were 0.02 billion units, +67% over the same period. High-end mobile phone modules achieved remarkable results. The dual-group focus periscope products have been mass-produced, and the gross margin of 24H1 mobile phone modules is 6-8%. The company expects gross margin to increase to 6-10% in 2024, and 24H2 ASP will continue to increase.

Automotive: Steady growth and continuous layout, maintaining high profitability

24H1's automobile-related product revenue was 2.88 billion yuan, +16% year over year, of which:

1) Vehicle lens shipments were 0.532 million pieces, with a year-on-year ratio of +13.1%, and the gross margin was stable at around 40%. Currently, the company has completed the development of automatic heating ADAS vehicle lenses and has been targeted for automotive OEM projects. The company expects automotive lenses to maintain stable gross margins in 2024, while the shipment volume is expected to increase 10-15% year-on-year.

2) The company continues to rapidly develop the automotive module market, maintains the highest market share of 8MP in the world, and has been designated as the leading European automotive OEM platform-based core project. Currently, the amount of the company's vehicle module target project exceeds 10 billion yuan. In addition, the company has completed the development of long-range lidar modules and all-solid-state blind-bridging lidars and obtained a number of fixed-point projects, and has independently developed PGU based on chips from leading HUD manufacturers. The company expects mass production of 24H2 to begin.

Profit forecast and investment rating: We believe that the company's high-end mobile phone products are expected to continue, and there is still considerable room for growth in automotive products. Therefore, we raised the company's anticipated net profit to mother in 2024/2025 from 1.76/2.28 billion yuan to 2.3/2.91 billion yuan, and the net profit to mother is 3.45 billion yuan in 2026. The latest closing price corresponds to PE 22.7/17.9/15.1 times, respectively, to maintain the “buy” rating

Risk warning: Product structure optimization falls short of expectations, automotive product shipments fall short of expectations, smartphone shipments fall short of expectations, and industry competition intensifies.