Sunny Optical 1H22 result was released on 15 August 2022 and following the Company’s profit warning announcement that the net profit will drop 45-50% yoy. The 1H22 result was at the lower end of its profit warning: Net Profit -50% yoy to RMB1.4bil, due to weaker revenue (-14% yoy) and decline in Operating Profit margin due to dis-economics of scales.
Revenue and Gross Profit from smartphone-related products are badly affected due to weak demand of smartphone market and downgrading specification of smartphone camera. However, vehicle lens set did better as revenue related to the optical parts of LiDAR and head-up display increased significantly as the projects have been commenced mass production.
I expect Sunny Optical’s handset lens set to pick up in 2H22 from the recovery and pent-up demand for the Android smartphone. Sunny Optical will be supplying 7p wide lens to Apple’s latest iPhone 14 series in 2H, and may even replace current lens incumbents such as Largan and Genius Optical in supplying ToF lenses. I am also hopeful about the growth of vehicle handset business as supply chain issues and chip shortages gradually improve, while smart EV cars continue to accelerate its penetration which will benefit Sunny Optical. More important, Sunny Optical revealed that it will start mass production for its VR pancake modules, which will be an increasing significant portion of the topline growth.
Many sell-side analysts are relatively pessimistic about Sunny Optical right now, but in order to “one-up on Wall Street” we have to think few steps ahead of the market. Currently, I think Sunny Optical is on the track right to unlock its long-term potential.
Personal opinion, sharing with everyone for reference. Not a buy or sell advice.
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