Macquarie: Emerging markets continue to lead the growth of smartphones this year. Bullish on AAC TECH (02018), BYD ELECTRONIC (00285), SUNNY OPTICAL (02382), XIAOMI-W (01810), and others.

Macquarie released a research report stating that after a 6.1% growth last year, it is expected that global smartphone sales will continue to rise this year. This year, next year, and in 2027, sales are expected to increase by 6.4% to 1.31 billion units, 4.7% to 1.37 billion units, and 0.6% to 1.38 billion units respectively. It is predicted that sales in emerging markets will increase by 6% to 7% year-on-year, benefiting from the increase in smartphone penetration rate and the expansion of the low-price smartphone market. The company expects production to decrease from 2022 to 2024, and demand in mature markets to improve. The firm noted that AAC TECH (02018) has a strong lens pricing strategy, an increase in market share for cameras and audio systems, smartphones and computers, which is expected to drive its net profit growth by approximately 38% this year. As for BYD ELECTRONIC (00285), the firm stated that an increase in Apple's supply chain share, growth in electric vehicle components/ADAS domain controllers, growth in shipments, recovery in sales of high-end Android smartphones, and improvement in overall gross profit margin due to changes in product mix will benefit the company. The firm pointed out that SUNNY OPTICAL (02382) is its top pick in the industry, mainly due to its average selling price and profit margin driving profit growth, with its automotive business providing tailwinds for future growth. The firm also mentioned that XIAOMI-W (01810) has increased its market share in smartphones and the expansion of its global IoT business has improved core business profitability. Xiaomi's electric vehicles are gaining momentum in the Chinese market, with gross profit margins close to industry leaders, thanks to strong product design, high production utilization rates, and supply chain management. Therefore, the firm has given target prices for AAC TECH, BYD ELECTRONIC, SUNNY OPTICAL, and Xiaomi at HK$61, HK$70.4, HK$125.6, and HK$54.5 respectively, with a rating of "outperform market".