CICC released a research report expressing optimism about SUNNY OPTICAL's (02382) continued profit improvement trend, cautiously raising 2025/2026 net profit attributable to shareholders by 3%/4% to 3.62 billion yuan/4.26 billion yuan respectively. The current stock price corresponds to 25/26 P/E ratios of 21.9x/18.4x. The firm maintains its outperform industry rating and target price of HK$99.2, corresponding to 25/26 P/E ratios of 27.4x/23.0x, representing a 25% upside from the current stock price.
CICC's main viewpoints are as follows:
**H1 2025 Performance Slightly Exceeds Expectations**
SUNNY OPTICAL announced its 2025 interim results: first-half revenue of 19.65 billion yuan, up 4% YoY and 1% QoQ; net profit attributable to shareholders of 1.65 billion yuan, up 53% YoY and 2% QoQ. The performance slightly exceeded both the firm's and market expectations, primarily due to: 1) Significant improvement in profitability. Benefiting from the increased proportion of high-end products in mobile phone lenses and camera modules, as well as faster growth in automotive business with higher gross margins, the company's H1 2025 gross margin reached 19.8%, up 2.6ppt YoY and 0.5ppt QoQ. Among these, optoelectronic products' gross margin was 10.6%, up 2.4ppt YoY and 0.8ppt QoQ, while optical components' gross margin was 31.0%; 2) Share of profits from associates increased by approximately 100 million yuan YoY.
**Mobile Optics Upgrade Continues, Company Maintains Product Structure Optimization Strategy**
The company's mobile-related revenue in H1 2025 grew 2% YoY, with both mobile phone lenses and camera modules seeing approximately 20% YoY ASP increases, mainly due to higher proportion of high-end products. For example, H1 2025 glass-plastic hybrid mobile phone lens revenue grew over 100% YoY, and large image surface and periscope module revenue grew over 20% YoY, driving YoY improvement in mobile product gross margins. The firm believes industry upgrade momentum continues, and the company, leveraging its leading capabilities in ultra-high precision optical assembly technology and ultra-miniature molding packaging technology, is expected to continue allocating resources to higher-priced, higher-barrier projects while driving profit growth.
**Advanced Autonomous Driving Accelerates Adoption, Driving Company Growth**
The company's automotive lens shipments in H1 2025 grew 21.7% YoY, while automotive module revenue grew approximately 35% YoY, which the firm believes is mainly due to accelerated ADAS penetration. According to the company's investor day, global average lenses per vehicle are expected to grow from 3.5 units in 2024 to over 4.3 units in 2025, while L2+ vehicles typically require about 11 lenses per vehicle. The firm believes the market expansion potential is significant, accompanied by technical upgrades such as pixel enhancement, ultra-low reflection coating, and active cleaning. As a global leader in automotive lenses, the company is well-positioned to benefit fully. Regarding other products, according to announcements, the company's 8MP automotive modules have newly secured orders from leading European automakers, and LiDAR order amounts have exceeded 1.5 billion yuan.
**Multiple Emerging Terminals Including XR, Handheld Imaging, and Machine Vision Show Promise**
According to announcements, in XR, the company has successfully prototyped virtual imaging lenses in the AR field while maintaining a leading position in AI glasses imaging lenses/modules. In handheld imaging, the company has capitalized on opportunities from tourism economy and software-hardware innovation breakthroughs in terminal products, cooperating with major clients in mass production of lenses and modules. In machine vision, the company's vision modules continue expanding industry applications, with lawn mowing robots and warehouse logistics robots' complete machine business scales continuing to grow. The firm is optimistic that these emerging businesses will open up the company's long-term growth potential.