CICC: Maintains "outperform" rating on SUNNY OPTICAL (02382), target price raised to HKD 99.2.

CICC released a research report stating that it maintains a "outperform" rating on SUNNY OPTICAL (02382), as the industry valuation of end-side AI and high-level intelligent driving industry has shifted upwards, raising the target price by 41% to HK$ 99.2. Due to the company's good ASP and gross margin trends, the bank has raised its 2024 net profit forecast by 3% to HK$ 2.69 billion and maintains a net profit forecast of HK$ 3.308/3.999 billion for 2025/2026. CICC's main points are as follows: Profit forecast is expected to increase by 140.0-150.0% year-on-year, slightly exceeding the bank's expectations SUNNY OPTICAL released a profit forecast notice, expecting to achieve a net profit attributable to the owner of HK$ 2.638-2.748 billion in 2024, a year-on-year increase of 140.0-150.0%, slightly exceeding the bank's expectations. The bank believes that the significant growth in the company's performance in 2024 is due to: 1) Recovery of smartphone shipments: According to Canalys, global smartphone shipments are expected to increase by 7% in 2024. Against the backdrop of the industry's cyclical recovery and the company's continuous expansion of its North American customer share, the company's smartphone lens shipments are expected to increase by 13.1% year-on-year. 2) Improvement in competitive landscape and product specification upgrades: The bank believes that price competition in the smartphone optical industry is easing in 2024. At the same time, both the industry and the company are shifting towards higher-specification product structures, leading to an increase in the company's smartphone lens and camera module ASP and gross margin. 3) Continued increase in the level of automotive intelligence: According to Gaogong Intelligence, the penetration rate of L2+ADAS in China increased from 6% in 2023 to 11% in 2024. The average number of onboard cameras per vehicle increased from 3.8 in 2023 to 4.5 in 2024, driving the company's onboard lens shipments to increase by 12.7% year-on-year. The company also released shipment data for January 2025: 1) Mobile optical: Lens shipments of 106 million pieces, up 3%/1% year-on-year/month-on-month; camera module shipments of 36.765 million pieces, down 41%/31% year-on-year/month-on-month, with the main reason for the decline being the high delivery demand in January and December last year and the impact of the Chinese New Year holiday in January this year. 2) Automotive optical: Lens shipments of 12.827 million pieces, up 6.5%/102% year-on-year/month-on-month, with the month-on-month growth mainly caused by the low base due to the Christmas holiday season in December last year. Looking ahead to 2025, the trend of increasing ASP and gross margin of mobile optical products is expected to continue. The bank believes that optics will still be the main point of entry for mobile micro-innovation, including glass-plastic hybrid lenses, depth module submergence, and pixel upgrades. The company's product portfolio is expected to further upgrade. In addition, mobile subsidy policies and the expansion of end-side AI applications may stimulate consumer demand for upgrades. High-level intelligent driving and AI glasses drive the company's second growth curve. Regarding automotive, on February 10, BYD announced the "National Intelligent Driving" strategy, in which the front-view three-eye "Divine Eye C" will be available in vehicles priced below 100,000 RMB, the bank is optimistic that the penetration rate of the entire high-level intelligent driving industry will rapidly increase under this influence, driving up the number and specifications of onboard cameras, and the company, as a global leading supplier of onboard lenses and camera modules, is expected to fully benefit. As for AI glasses, it is recommended to pay attention to the product releases and sales of various manufacturers.