Sunny Optical_ October_ CCM Still Weak But Lens Resilient

Key Takeaways Industry Overview - Industry: Asia Pacific Technology Hardware - Coverage Universe: Greater China Technology Hardware Company Specific - Company: Sunny Optical (2382.HK) - Stock Rating: Overweight - Industry View: In-Line - Price Target: HK$72.00 Financial Highlights - Revenue: 36,300 million RMB (12/24e) - Net Income: 2,618 million RMB (12/24e) - EPS: 2.39 RMB (12/24e) Performance Analysis - Handset CCM: YTD growth rate decelerated from -1% in Jan-Sep to -5% in Jan-Oct. - Handset Lenses: Recorded +17% YTD growth in Jan-Oct. - Vehicle Lenses: YTD growth remains stable at 12% in Jan-Oct. Outlook - Handset CCM: Weak shipments but ASP and margin recovery expected. - Handset Lenses: Resilient performance likely to beat target. - Vehicle Lenses: Mix improvement remains a priority. Risks - Upside Risks: Improvement in handset lens gross margin, faster-than-expected vehicle lens/module growth, etc. - Downside Risks: Component shortages, intense CCM competition, weaker-than-expected handset lens demand, etc. Valuation Methodology - Base Case: Residual Income Model (RIM)-derived SOTP methodology. - Cost of Equity: 11% - Growth Rates: 10%, 8%, and 20% for medium-term, and 3%, 3%, and 3% for long-term. Analysts - Andy Meng, CFA: Equity Analyst - Betty Chen: Research Associate - Sharon Shih: Equity Analyst