The company's recent situation

Shunyu Optical Technology released October shipment data: 1) Mobile phone optics: The company shipped 33.779 million pieces of mobile phone camera modules, down 37.5% year-on-year/8.1% month-on-month, mainly due to the company's focus on middle and high-end projects, which led to a year-on-year decline in shipments but a significant improvement in product structure. Mobile phone lens shipments were 0.116 billion films, down 1.9% yoy/down 2.6% month-on-month. Dalliguang's monthly revenue increased 3.5% yoy/0.4% month-on-month during the same period, and Yu Jingguang's monthly revenue fell 22% yoy/24% month-on-month. We think it mainly reflects differences in the stocking needs of Android customers. 2) Vehicle-related products: The company shipped 8.706 million automotive lenses in October, up 11.5% year-on-year/6.5% month-on-month down. The year-on-year growth trend was determined throughout the year. 3) Other optoelectronic products: 0.727 million pieces were shipped in October, up 120.5% yoy/down 0.6% month-on-month.

reviews

Mobile phone optical shipments declined slightly from month to month. Focus on the optical upgrade of new Android devices and the optimization of the company's product structure. On the mobile camera module side, Sunyu's shipments fell 5% year on year in January-October, mainly due to the company's strategy of continuing to promote product structure upgrades. We believe that the increase in ASP and gross margin of the 2H24 camera module may offset the impact of the decline in shipments, and is still expected to achieve steady performance growth. On the mobile phone lens side, Sunyu's shipments from January to October increased 17% year over year. We expect the annual shipment growth rate to be higher than the company's previous guidelines. At the same time, ASP and gross margin are also expected to increase along with shipments of more 6P, 7P and glass plastic hybrid lenses. From an innovative perspective, optics is an important part of mobile phone micro-innovation. The new Android flagship models released in October, such as the Honor Magic7, Xiaomi 15, and vivo X200, are all equipped with a 50 million pixel triple camera. The Xiaomi 15Pro changes the floating telefocus to periscope telephoto. We believe that the optical upgrade of the flagship models is continuing, and the future may sink further to mid-range and low-end models. We are optimistic that Shunyu will continue to optimize its product structure in the context of expanding the capacity of the high-end lens and module market.

Automotive and XR related products are growing steadily. From January to October, Shunyu's car lens shipments increased 12% year over year. We see that the bicycle load capacity, average pixels, and localization level of vehicle cameras are increasing, and we are optimistic that the company will continue to benefit as a leading supplier of automotive lenses. In addition, Sunyu's shipments of other optoelectronic products increased 51% year-on-year from January to October, and we expect revenue from products such as camera modules and lenses to grow rapidly along with the volume of AR/VR terminals.

Profit forecasting and valuation

Shunyu Optical Technology is currently trading at 22.5 times 2024/18.8 times 2025 price-earnings ratio. We maintain the company's 2024/2025 net profit forecast of 2.47 billion/2.87 billion yuan. We maintained our industry rating and target price of HK$63.4, corresponding 25.4 times 2024 and 21.2 times 2025 price-earnings ratio, up 12.9% from the current stock price.

risks

Demand for global terminals continues to weaken, and the progress of intelligence in the automotive industry falls short of expectations.