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Market Review

Corporate News Commentary / Reports Summary

  • Sunny Optical (2382 HK HK$157.10 LONG TP=HK$195.00) Conference Call Takeaway
  • Guidance on YoY shipment growth of handset lens sets (HLS), camera modules (HCM) and vehicle lens sets (VLS) remain unchanged at 30-35%, 15-20% and 30-35% respectively.
  • GPM improvement should be reflected in 2H18 and 2019 when new products, as below, are released.

 

  • For HLS
  • f/1.8 aperture HLS is being mass produced. f/1.5 and f/1.4 will be commonplace in 2H18 and 2019.
  • More super wide-angle lens (>100o field of vision) will appear in high-end smartphones.
  • New HLS aim to reduce aberration.
  • Tri-camera setups, like the one on Huawei P20 Pro, should become more common in 2019.
  • Tri-cam performs better under dim-light and allows better optical zoom using the ‘periscope’ design.

 

  • For HCM

●     Sunny Optical has shipped movable HCM like the ones used in Oppo’s Find X and expects more ‘radical’ designs in 2H18.

●     Production is restricted by shortage of voice coil motors (VCM), capacitors and sensors.

●     New infrared-cut-on-chip (IOC) tech is an evolved version of mould-on-chip (MOC), enabling even smaller HCMs. HCMs made from IOC tech is expected to be released by 4Q18.

●     Tri-cam’s optical zoom is slated to reach 5-10x in 2019, with first product debut in 1Q19 (presume to be Samsung’s S10+); and over 10x by 2020.

●     Management expects Structured light (SLI) and time of flight (ToF) modules to co-exist as SLI is more accurate in close ups while ToF works faster and cheaper in longer ranges.

●     SLI and ToF modules will be mass produced in 3Q and 4Q18 respectively, but most will be shipped in 2019.

 

  • For VLS

●     Shipment of automotive camera modules has started, but larger volumes to be expected in 2H18 and 2019.

●     We expect the shipping automotive camera modules to help Sunny Optical gain market share from the current 55%.

 

Maintain LONG and TP unchanged – Sunny Optical is trading at 37.5x/28.8x 2018/19F P/E. We believe management’s track record in developing superior products compared to peers, proven earnings growth (47% 2013-2017 CAGR) and strong relationship with Huawei and Samsung justifies the company’s premium. (Phelix Lee)

 

China Market News

  • China market recouped earlier losses and made a good move in the afternoon yesterday.
  • Consumer staples and health-care stocks drew the most interest.
  • Property names were mostly up after China proposes to raise threshold of levying income tax.