JPMorgan slashed target price of Sunny Optical to HK$78 from HK$97, maintains Neutral rating

 

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Apple supplier Sunny Optical’s management has lowered this year’s business guidance for its three production lines – handset lenses and modules, automotive camera modules, and extended reality (XR) to reflect weak demand in the second half, said JPMorgan in a note.

Although orders from smartphone customers recovered in the second half, JPMorgan expected the company’s recovery path to be more difficult than its peers due to greater pressure on the average selling price and margins of handset products, as well as a lack of fundamentals to support its automotive and XR businesses. 

JPMorgan maintained its Neutral rating, lowered its earnings per share forecasts for 2023/24 by 30% and 19% respectively, and cut its target price from $97 to $78.

It lowered its sales forecast for the second half by 7% to 18 billion yuan, growing 26% from the first half and rising 11% from a year earlier, to reflect the slow recovery of the smartphone market.

The forecast for gross profit margin for the second half was also lowered from 19.3% to 18.5%, compared with 14.9% in the first half, reflecting increased price competition, it said.