Zhong You Securities: Initially "Buy" Rating to SUNNY OPTICAL (02382) with Profit Improvement in 24H1 Mobile Business

SUNNY OPTICAL(02382)2024/2025/2026382/442/48725/32/3724H1188.6032.1%32.4752.4%17.2%2.3 China Post Securities released a research report stating that Sunny Optical (02382) is covered for the first time, with a "buy" rating, and is expected to achieve revenue of 38.2/44.2/48.7 billion yuan in 2024/2025/2026 respectively, and achieve net profit attributable to shareholders of 2.5/3.2/3.7 billion yuan. The revenue of the company in the first half of 2024 is about 18.86 billion yuan, an increase of approximately 32.1% compared to the same period last year. The gross profit is approximately 3.247 billion yuan, an increase of approximately 52.4% compared to the same period last year. The gross profit margin is approximately 17.2%, an increase of approximately 2.3 percentage points compared to the same period last year. The main points of China Post Securities are as follows: The smartphone market is recovering, and revenue is growing rapidly. The revenue of the company in the first half of 2024 is about 18.86 billion yuan, an increase of approximately 32.1% compared to the same period last year. The increase in revenue is mainly due to the recovery in the smartphone market, with increasing revenue from smartphone lenses and modules; at the same time, benefiting from the expansion of the CKH HOLDINGS industry, revenue from car lenses and modules has also increased; in addition, with the increased demand for VR pancake modules compared to the same period last year, revenue from VR-related products has increased significantly. The revenue from the optical components business is approximately 5.48 billion yuan, an increase of approximately 26.9% compared to the same period last year. The increase in revenue is mainly due to the increase in revenue from smartphone lenses, car lenses, and VR-related products. The revenue from the optoelectronic products business is approximately 13.191 billion yuan, an increase of approximately 35.5% compared to the same period last year. The increase in revenue is mainly due to the increase in revenue from smartphone camera modules and car modules. The revenue from the optical instruments business is approximately 0.189 billion yuan, a decrease of approximately 15.8% compared to the same period last year. Profitability of smartphone lenses and camera modules has improved. The company's gross profit in the first half of 2024 is approximately 3.247 billion yuan, an increase of approximately 52.4% compared to the same period last year. The gross profit margin is approximately 17.2%, an increase of approximately 2.3 percentage points compared to the same period last year. The increase in gross profit margin is mainly due to the improvement in the gross profit margin of smartphone lenses and camera modules. The gross profit margins of the optical components business, optoelectronic products business, and optical instruments business are approximately 31.8%, 8.2%, and 47.9% respectively (compared to approximately 26.0%, 6.9%, and 42.7% in the same period last year). The company's net profit in the first half of 2024 is approximately 1.111 billion yuan, an increase of approximately 142.0% compared to the same period last year; the net profit margin is approximately 5.9% (compared to approximately 3.2% in the same period last year), the increase in net profit margin is mainly due to the improvement in the profitability of smartphone lenses and camera modules. The company's net profit attributable to shareholders in the first half of 2024 is approximately 1.079 billion yuan, an increase of approximately 147.1% compared to the same period last year. The basic earnings per share of the company in the first half of 2024 is approximately 0.99 yuan, an increase of approximately 147.7% compared to the same period last year. Continued increase in R&D investment in automotive and XR-related business. In terms of R&D expenditure, the company's R&D expenditure in the first half of 2024 is approximately 1.468 billion yuan, an increase of approximately 21.9% compared to the same period last year, accounting for approximately 7.8% of the company's revenue in the review period, compared to approximately 8.4% in the same period last year. The increase in absolute amount is mainly due to the company's continued increase in R&D investment in automotive and XR-related businesses. In terms of sales and distribution expenses, the company's sales and distribution expenses in the first half of 2024 are approximately 0.226 billion yuan, a decrease of approximately 5.8% compared to the same period last year, accounting for approximately 1.2% of the company's revenue in the review period, compared to approximately 1.7% in the same period last year. The decrease in absolute amount is mainly due to the company's strengthened control over marketing-related expenses. In terms of administrative expenses, the company's administrative expenses in the first half of 2024 are approximately 0.563 billion yuan, an increase of approximately 23.0% compared to the same period last year, accounting for approximately 3.0% of the company's revenue in the review period, compared to approximately 3.2% in the same period last year. The increase in absolute amount is mainly due to the rise in the company's administrative staff salaries, increased spending on information technology construction, and an increase in the issuance of restricted stock under the company's restricted stock award plan. Strong growth in shipments of optical components. In the automotive lens business, the company's shipments of automotive lenses in the first half of 2024 increased by approximately 13.1% to 53,234,000 units compared to the same period last year. Against the background of continuous growth in demand for automotive cameras, the company has deepened its core business in the high-end advanced driver assistance system (ADAS) sensor market, further consolidating its leading industry position. The company has completed the development of ADAS automotive lenses with automatic heating function, which can quickly de-ice and defog, and has obtained designated projects from automotive brand manufacturers. In addition, the company has also completed the development of a 3 million pixel side-view glass-plastic composite ADAS automotive lens, which further reduces the number of glass lenses and significantly reduces costs. In the emerging field of automotive optics, the company continues to explore market opportunities in laser radar, head-up displays (HUD), and intelligent automotive lighting, strengthens product and patent layouts, and seeks continuous technological breakthroughs. In terms of laser radar, the company has obtained designated projects for multiple laser radar products, and has completed the development of long-distance laser radar modules. At the same time, the company has also completed the development of a fully solid-state blind spot suppression laser radar platform product, which has a larger field of view and smaller volume, and is being promoted globally. In addition, the company has made technological breakthroughs in the production equipment for laser radar emission and reception modules, shortening the installation and adjustment time of laser radar. In terms of HUD, the company has successfully obtained designated projects based on the core optical engine (PGU) developed independently based on chips from head-up display manufacturers, and is expected to be mass-produced in the second half of 2024. In terms of intelligent automotive lighting, the company actively seizes the market opportunities brought about by the rise of projection small lamps, and has completed the development of multi-channel projection small lamp products. In the consumer-grade SUN HING VISION business, with the gradual maturity of hardware and continuous enhancement of AI technology, multimodal interactive scenarios inject new vitality into the XR industry, and the development of the industry ecosystem becomes more clear. In the review period, the company deepened cooperation with leading global manufacturers in new products and technologies in the display and interaction categories, driving the definition and mass production of multiple display optical and sensor optical differentiated products, and continuously supplying major customers in the supply chain.Occupied a crucial position.In the field of mobile phone lenses, benefiting from the recovery of global smartphone shipments, the company's mobile phone lens shipments increased by approximately 23.7% year-on-year to 634,401,000 pieces, maintaining its position as the global market share leader. At the same time, the company actively enhances the average selling price of mobile phone lenses and improves gross profit margins by leveraging its core competitiveness in "high specifications, high quality, and high added value" products. For example, the company has achieved mass production of several one-inch glass-plastic hybrid main camera mobile phone lenses, becoming a leader in the industry for large-aperture glass-plastic hybrid main camera mobile phone lenses. In terms of periscope mobile phone lenses, the company has achieved mass production of several large-aperture periscope mobile phone lenses, which can maintain clear image quality and vivid colors even when shooting at long distances. In addition, the company's shipments of dual-group focus periscope mobile phone lenses continue to increase, and it has completed the research and development of many multi-group periscope mobile phone lenses to achieve the dual functionality of close-up shots and long-distance shots, assisting customers in achieving excellent imaging goals. Deepening ecological cooperation in optoelectronic products. In the automotive module business, the company continues to deepen ecological cooperation with mainstream platform solution providers such as Mobileye, Horizon, Qualcomm, and NVIDIA, and successfully develop reference design solutions, becoming the preferred supplier for leading customers developing autonomous driving technology. In the environmental perception product line, the company's 8-megapixel automotive modules continue to maintain the global market share leader position and have secured core projects with major European automotive manufacturers during the review period. In addition, with deep accumulation in chip-on-board ("COB") packaging technology, the company's 8-megapixel COB automotive modules are favored and recognized by many domestic car OEM customers, with shipment volume ranking at the forefront of the industry. In the smart cockpit product line, the company collaborates with leading customers to continuously innovate products and solutions, such as in-cabin wide-angle depth sensing solutions, to enhance driving safety performance and enrich the driving experience. Additionally, the company, together with core ecological business partners, is building advanced smart cockpit solution development capabilities. In the XR field, the company continues to provide core products such as instant positioning and mapping ("SLAM") modules, high-definition perspective camera modules, etc., to leading customers and actively develops next-generation XR vision modules with better performance and stable quality, gaining high recognition from mainstream customers. Leveraging the advantages of miniaturization and high-precision assembly, the company has become the industry's first manufacturer to mass-produce the smallest volume monochrome and color micro-LED light engines, and has deepened cooperation with leading XR customers, expanding the influence of the company's miniaturized light engines in the industry. In the field of Siasun Robot & Automation vision, the company's Siasun Robot & Automation navigation, obstacle avoidance, and AI recognition camera modules and modules are widely used in the consumer-grade Siasun Robot & Automation field and have been mass-produced and shipped to mainstream customers. In addition, the company's independently developed biometric algorithm modules have also been successfully shipped in bulk to leading smart door lock customers. In the mobile camera module business, in the first half of 2024, with the recovery of global demand in the smartphone market, the company's mobile camera module shipments increased by approximately 13.5% year-on-year to 289,013,000 pieces, maintaining its position as the global market share leader. Based on deep accumulation in miniaturization packaging and high-precision optical assembly, along with outstanding advantages in mobile lenses, motors, and mobile camera module integration, the company's competitiveness in high-end products has been further strengthened, leading to increased market share and improved product structure, average selling price, and overall gross profit margin for mobile camera modules. In the first half of 2024, the company has achieved mass production of one-inch main camera with long-stroke guide motors, which not only ensures the resolution of the camera in both far and near focus, but also contributes to the ultra-thinness of the camera. At the same time, dual-group focus periscope mobile camera modules have also been mass-produced. In addition, the company continues to make technological breakthroughs in the core motion components of main and periscope cameras, and has completed the research and development of a two-billion-pixel integrated periscope mobile camera module with self-developed motors, a periscope integrated mobile camera module with multi-fold prisms and self-developed motors, and a 1/2" main camera motor. Furthermore, the company is deeply engaged in the construction of intelligent factories, vigorously promoting the operation of the benchmark factory in Vietnam, constructing an international operation system, and further enhancing high-end scale manufacturing capabilities, strengthening global supply capabilities, and consolidating its leading position in the industry. Continued breakthroughs in R&D innovation in optical instruments. In the intelligent inspection equipment business, the company further focuses on market demand for industrial intelligent equipment, medical equipment, and emerging market equipment, fully leveraging its advantages in optical imaging, precision mechanical design, and image processing algorithms to empower advanced manufacturing. In the first half of 2024, the company completed the research and development of the fifth-generation line body for post-process inspection of mobile lenses, achieving an efficiency improvement of more than 50% compared to the previous generation. This line body integrates functions such as spatial frequency response, stray light, low contrast defects, and automatic visual inspection, and combines high-precision optical systems with self-developed AI models and traditional image algorithms to achieve high-precision detection of defects and performance of mobile lenses, placing its comprehensive performance at the forefront of the industry. In the microscope business, the company has once again achieved breakthroughs in R&D innovation. In the first half of 2024, the company successfully developed the first wide-band flat-field large numerical aperture 40X water immersion lens. This objective lens has excellent performance in terms of numerical aperture, resolution, color correction, as well as extremely low autofluorescence and large field of view flat-field characteristics. As a core component of microscopes, this objective lens greatly expands the application of wide-field, structured light, confocal, and super-resolution microscopy systems in the field of life sciences.