Apple supplier Sunny Optical expected first-half net profit to tumble 65% – 70% year over year to 407 – 475 million yuan, with a median of 441 million yuan, sliding 67% year over year and 58% quarter on quarter. That’s 67% and 60% lower than Goldman Sachs and market forecasts, respectively, the bank said in a note.
The company’s management attributed the drop to weak global demand for smartphones, downgraded smartphone camera specifications and intense competition, which led to a drop in shipments of handset lenses and handset camera modules, increasing the pressure on average selling prices and gross margins. In addition, there was an unrealized foreign exchange loss of about 162 million yuan on the company’s USD bonds in the first half.
Based on the guidance, Goldman expected Sunny Optical’s first-half revenue to drop 24% year over year to 13 billion yuan, compared with an 8% fall in the second half of 2022. Looking ahead, the bank expected the company’s revenue to continue to recover in the second half of the year, supported by improved seasonality, automotive cameras and new product launches from Apple.
Goldman Sachs maintained its Neutral rating on Sunny, believing that smartphone demand saturation, camera specification upgrades see the top, and intensified competition could limit the company’s revenue growth and gross margin recovery. The bank cut its target price from $90 to $86.