Recent status of Penghu

Shunyu Optical Technology released August shipment data: 1) Mobile phone optics: the company's mobile phone camera module products shipped 39.625 million pieces, down 25.2% year-on-year/9.7% month-on-month; mobile lens products shipped 0.124 billion films, up 14.6% yoy/7.5% month-on-month. Shipments of mobile phone camera modules declined a lot year-on-year in June-August. We believe that, on the one hand, it was because Android phones resumed shipping earlier in the same period last year and the base was not low; on the other hand, it was mainly due to the company's focus on middle and high-end projects in the context of a stable market, which led to a year-on-year decline in shipments but a significant improvement in the product structure. Mobile phone lenses continued to grow month-on-month in August, and the trend was significantly better than that of camera modules. We think it reflects that major North American customers are already in the traditional peak season for picking up goods. 2) Vehicle-related products: The company shipped 8.439 million automotive lenses in August, up 4.3% year-on-year and down 4.2% month-on-month. Against the backdrop of intense cost competition in the industry, we believe the company's automotive lens business is growing steadily.

reviews

Major North American customers have entered the peak shipping season and are concerned about upgrading the structure of mobile phone optical products. On the mobile phone camera side, Shunyu's August shipments increased 14.6% yoy/7.5% month-on-month, and Daliguang's August revenue increased 54.4% yoy/29.4% month-on-month. We think it was mainly due to the new phone preparation cycle for major North American customers. Since the lens specifications of major North American customers are higher than the Android average, we believe that Shunyu's sales volume at major North American customers in the second half of the year is expected to further increase the share of 6P and above shipments, and drive a month-on-month increase in ASP and gross margin. On the mobile phone camera module side, Sunyu's shipments increased 3% year on year in January-August, which is trending towards the “annual shipment volume remains the same year over year” guideline given by the company at the performance meeting. Considering that 2H23 Android shipments have returned to a normal base, we believe that 2H24 module shipments may slow down year over year, but from the semi-annual report, we have also seen the company's clear product structure upgrade strategy. Investors are advised to pay close attention to the revenue and profit impetus of ASP and increased gross margin.

Automotive optics and XR applications are progressing steadily. Shunyu's car lens shipments increased 11% year-on-year in January-August. We saw an increase in the bicycle load capacity, average pixels, and level of localization of car cameras. We believe that the company is expected to continue to benefit as a leading supplier of automotive lenses. Furthermore, we saw a 46% year-on-year increase in Sunyu's shipments of other optoelectronic products in August. We believe it was mainly due to the increase in AR/VR equipment shipments, and we are optimistic that the gradual release of AR/VR will drive the company's growth.

Profit forecasting and valuation

Shunyu Optical Technology is currently trading at 18.6 times 2024/15.6 times the 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 36% 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.