20220323-招银国际-舜宇光学科技-02382.HK-2H21_first_take__worse-than-expected_GPM_pressure_6页_1mb

Sunny Optical (2382 HK) Company Update Summary

Core Content

Sunny Optical, a key player in the optical components industry, reported its 2H21 financial results, which fell below expectations. The company experienced a decline in revenue and net profit compared to the previous year, primarily due to a drop in gross profit margin (GPM) and challenges in the smartphone camera module (CCM) segment.

Main Points

Financial Performance in 2H21

• Revenue: Declined by 8% YoY to RMB 17,663 million.
• Net Profit: Declined by 26% YoY to RMB 2,305 million.
• Gross Profit Margin (GPM): Dropped to 21.5% from 24.9% in 1H21, significantly below the CMBI and consensus estimates.
• Operating Profit: Decreased by 49% YoY to RMB 2,506 million.
• Net Profit Margin: Reduced to 13.1% from 14.2% in 1H21.

Segment Performance

• Optical Components (Auto/Handset Lens): GPM fell to 35.9% in 2H21 from 42.9% in 1H21.
• Optoelectronic (HCM, 3D): GPM dropped to 12.4% in 2H21 from 14.8% in 1H21.
• Optical Instruments: GPM increased to 49.3% in 2H21 from 38.6% in 1H21.
• Blended GPM: Declined to 21.5% in 2H21, below the CMBI estimate of 23.4% and the consensus of 23.5%.

Key Challenges

• Despec Trend: Continued reduction in camera module specifications.
• Android Destocking: Weak demand following the launch of the iPhone SE 5G.
• Intense Competition: With AAC, Newmax, and Largan in the 5P and 6P/7P segments.
• Lower ASP: Handset lens ASP decreased by 14% in 2H21, and HCM ASP decreased by 2%.
• Market Trends: Quad/triple-cam penetration dropped to 65% in January 2022, from 69% and 71% in 3Q21 and 2Q21 respectively.

Key Information

Earnings Growth

• EPS: RMB 2.11 in 2H21, with a YoY growth of 54%.
• FY22E EPS: Expected at RMB 5.12, with a 12% growth.
• FY23E EPS: Expected at RMB 6.24, with a 21.8% growth.

Valuation

• Current P/E (FY22E): 23.5x, which the analysts consider stretched given the headwinds.
• Target Price (TP): HK$140.5, based on a SOTP valuation with a weighted average P/E of 22.8x.
• Consensus EPS (FY22E): RMB 5.12, with a TP of 22.8x FY22E P/E.
• Peer Comparison:
  • Q Tech: Buy rating, with a higher P/E multiple.
  • Cowell: No rating (NR), with lower P/E.
  • Truly: NR, with lower P/E.
  • Catcher: NR, with lower P/E.
  • Largan: NR, with higher P/E.
  • Lite-on: NR, with higher P/E.
  • Primax: NR, with higher P/E.
  • O-film: NR, with higher P/E.

Valuation Ratios

• P/B (FY22E): 5.1x, with a downward trend over the years.
• ROE: 21.6% in FY22E, slightly lower than previous years.
• Net Debt/Total Equity: Net cash throughout the periods.
• Current Ratio: Increased to 2.3x in FY22E.
• Inventory Turnover Days: Stabilized at 60.0 days.
• Receivable Turnover Days: Stabilized at 85.7 days.

Financial Summary Highlights

• Revenue Growth: Expected to be 4.9% in FY22E and 14.5% in FY23E.
• Gross Profit: Expected to grow by 3.2% in FY22E and 18.9% in FY23E.
• Operating Profit: Expected to grow by 7.3% in FY22E and 21.4% in FY23E.
• Net Profit: Expected to grow by 9.1% in FY22E and 21.8% in FY23E.

Analyst Recommendation

• Rating: Maintain HOLD.
• Reasoning: While the company has a positive long-term outlook, the current valuation is considered stretched due to near-term headwinds.
• Target Price: HK$140.5, with a -3% downside from current price (HK$144.6).
• SOTP-Based TP: Reflects the company's diversification and product upcycle visibility.

Shareholding and Market Data

• Market Cap: HK$158,824 million.
• Average 3-Month Turnover: HK$1,072.45 million.
• 52-Week High/Low: HK$259.4 / HK$113.9.
• Shareholding Structure:
  • SUN XU LTD: 35.47%
  • JPMORGAN CHASE: 5.73%
  • WENJIAN WANG: 3.04%

Share Performance

• 1-Month Return: -27.3%
• 3-Month Return: -41.9%
• 6-Month Return: -36.4%

Conclusion

Sunny Optical faces near-term challenges due to despec trends, Android destocking, and intense competition, which have impacted its GPM and earnings. While the company is expected to show growth in the long term, the current valuation is viewed as stretched, leading to a HOLD recommendation. The target price of HK$140.5 reflects a fair valuation based on SOTP methodology, considering the company's diverse business segments and growth potential. Investors are advised to independently evaluate the investment and consult with a financial advisor.