Citigroup: Gives SUNNY OPTICAL (02382) a "buy" rating with a target price of 67 Hong Kong dollars.

Citigroup released a research report stating that SUNNY OPTICAL's performance in 2025 will mainly depend on specification upgrades and the expansion of the real business development. The target price is 67 Hong Kong dollars, with a "buy" rating. The company's management expects that specification upgrades will start with high-end products, and the launch of new AI smartphones will help drive component upgrades. It is expected that the gross profit margin/average selling price of mobile phone products will improve as a result, and the yield is also expected to increase. The competitive environment is estimated to remain stable in 2024-25. The report states that Sunny Optical's 2024 guidance is basically on target, with the shipment volume of mobile phone lenses exceeding expectations, while the shipment of mobile camera modules did not meet expectations, but the performance of automotive lenses met expectations. It is predicted that the global overall mobile phone shipments will increase by 2% year-on-year this year (excluding the impact of subsidies). With the launch of new high-end products such as pancake lenses and the strong contribution of the second generation of AI smart glasses products, it is expected that Sunny Optical's XR revenue will increase by 25% year-on-year last year. Sunny Optical's capital expenditure last year is estimated to be about 3 billion RMB, of which 800 million was invested in a new factory in Vietnam. The capital expenditure budget for 2025 is estimated to be around 2-3 billion RMB.