BofA Securities cut target price of Sunny Optical to HK$55, with Outperform rating

 

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BofA Securities cut the target price of Apple supplier Sunny Optical from HK$57 to HK$55 and reiterated its Outperform rating.

It also lowered the forecasts of the company’s 2023-25 earnings by 2% – 14% to reflect the results and conservative outlook.

Sunny Optical’s net profit slumped by 67.8% year over year in the first half to 436.7 million yuan and revenue dropped by 15.9% to 14.28 billion yuan, mainly due to the fall in the sales of handset lens sets and camera modules.

The management believed the second half of 2023 will be the trough for the handset industry, but BofA expected its pricing power to remain under pressure due to competition and the increase in handset brands’ bargaining power, the broker said.

For extended reality (XR), Sunny Optical has lowered its sales target this year from growing by over 30% to growing by over 20% due to slower growth in the first half of 2023, and expected the debut of Quest 3 to support momentum in the second half.

The management now expects shipments of vehicle lenses to grow by over 15% this year, which indicates risks in the second half, the broker said.

Meanwhile, Sunny Optical cut its car camera module sales target from 2 billion yuan to 1.6 billion yuan due to a weaker-than-expected sales in the first quarter.