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What's new
Sunny reported its November shipment data on December 9. The major positives include 43% YoY growth in November handset lens shipment (+39% YoY in 11M19), and 530% YoY growth in shipment of optoelectronic products (mainly ToF camera modules) (+385% YoY in 11M19). As we pointed out in our recent report, we believe Sunny has multiple structural growth opportunities in the smartphone optics value chain in 2020, including ToF camera to support AR (Sunny, O-Film) and optical image stabilization (OIS) to support video services (e.g. Alps). We maintain HK$140 TP unchanged after this strong monthly data and Sunny’s share price has just reached our TP.
Comments
Full-year handset lens shipments to beat our forecast. Sunny reported 42.9% YoY growth (10.9% MoM decline) in November handset lens shipments to 129.9mn. YoY shipment growth has been above 40% since August. We believe this is mainly driven by its market share gain in Chinese customers and continued multi-cam upgrade. Since 11M19 shipment already reached 97% of our full-year forecast, we believe Sunny’s 2019 shipment should beat our forecast and its own guidance.CCM and ToF module to see strong growth. Sunny recorded 29.7% YoY (11.5% MoM) growth in November CCM shipments. The 23% YTD growth of CCM is on track to finish the firm’s annual target. The shipment of other optoelectronic products (driven by ToF) grew 530% YoY (+36.4% MoM) to 6.5mn units in November. We believe ToF may be the optical solution for most flagship models in the 5G era.
Vehicle lens continues robust growth. Vehicle lens shipments grew 32.4% YoY and 10.5% MoM to 5.2mn units in November. YoY growth has been above 30% for 4 straight months since August. We believe this segment will benefit from ADAS penetration in the future.Valuation and recommendation
Sunny is trading at 42.2x 2019e and 30.0x 2020e P/E. We maintain our earnings forecast and our OUTPERFORM rating with a target price of HK$140, representing 30x 2020e P/E. Sunny’s share price has just reached our TP.
Risks
Weak Android phone sales; US-China trade friction.
Figure 1: Sunny – monthly handset lens set shipments
Source: Company filings, CICC Research
Figure 2: Sunny – monthly shipments of other optoelectronic products
Source: Company filings, CICC research
Figure 3: Sunny – monthly shipments of vehicle lens sets
Source: Company filings, CICC Research
Figure 4: Sunny – monthly shipments of handset camera modules
Source: Company filings, CICC research
Figure 5: Sunny – monthly shipments
Source: Company filings, CICC Research
Figure 6: Chinese mainland – monthly smartphone shipments
Source: CAICT, CICC Research
Figure 7: Largan – monthly sales trends
Source: Wind Info, CICC Research
Figure 8: P/E band
Source: Wind Info, Bloomberg, CICC Research
Figure 9: P/B band
Source: Wind Info, Bloomberg, CICC Research
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