Broker: UOB Kay Hian
Date of Report: Thursday, 21 August 2025

Sunny Optical Delivers Robust 1H25 Earnings: Premiumization and Advanced Tech Propel Strong Outlook

Executive Summary

Sunny Optical Technology (2382 HK) has delivered an impressive set of results for the first half of 2025, significantly beating market expectations on margins and net profit. The company’s continued focus on premiumization, technological advancement, and expansion into high-growth sectors like vehicle cameras, LiDAR, and smart glasses underpins a strong outlook for the rest of 2025 and beyond. UOB Kay Hian maintains a BUY rating and raises the target price to HK\$115.00, projecting nearly 40% upside from current levels.

Company Overview

Sunny Optical is a leading designer, manufacturer, and seller of optical and optical-related products including glass/plastic lenses, lens sets, camera modules for mobile phones and digital cameras, microscopes, and analytical instruments. The company is listed in Hong Kong (2382 HK), with a market capitalization of HK\$90.2 billion.

Stock Performance Snapshot

– Current Share Price: HK\$82.25 – Target Price: HK\$115.00 – Upside: +39.8% – 52-week High/Low: HK\$96.15 / HK\$42.30 – Market Cap: HK\$90.2 billion (US\$11.64 billion) – Major Shareholders: Chairman and employees (35.5%) – FY25 NAV/Share: RMB 25.32 – FY25 Net Cash/Share: RMB 2.49

1H25 Financial Performance: Key Highlights

Sunny Optical posted a standout 1H25, with net profit surging to RMB 1,646 million, substantially outperforming consensus estimates. The strong beat was primarily driven by margin expansion in the optoelectronic and optical instruments businesses, while revenue came in line with expectations.

Segmental Highlights and Business Trends

• Handset Business: Handset lens set (HLS) revenue up 1.7% YoY, with premium products (six or more glass elements, glass-plastic hybrids, large image size, and periscope modules) showing robust growth. This premiumization trend is supporting ASP and margin expansion despite a tepid broader smartphone market.
• Vehicle Business: Vehicle-related revenue surged 18.2% YoY. Shipments of vehicle lens sets (VLS) rose 21% YoY; vehicle camera modules increased 35% YoY. LiDAR and HUD components also contributed, albeit at a slower pace. LiDAR is anticipated to become a crucial long-term growth driver with the transition to higher-level ADAS (L3+), and Sunny has already secured over RMB 1.5 billion in LiDAR projects.
• XR/Smart Glasses: XR revenue rose 21.1% YoY, with smart glasses offsetting VR headset declines. Sunny retains its global leadership in imaging modules for smart glasses, and the segment is expected to see slight revenue growth in 2025.
• IoT and New Revenue Streams: Leveraging its handset optical technologies and AI, Sunny is expanding into handheld imaging devices (action/360 cameras) and robotic products (lawn mowers, pool cleaners). Handheld cameras are benefiting from a move toward multi-camera systems and broader consumer adoption.

Management Guidance for 2025

• Handset lens sets: +5-10% YoY growth (upgraded from prior +5% shipment growth guidance)
• Vehicle business: +20% YoY revenue (previously VLS: +15-20% shipment growth; VCM: +40% revenue growth)
• Margins: HLS margins 25-30%, HCM margins 8-10%; management sees potential for 2H25 margins to exceed upper guidance
• XR products: Slight revenue growth, with smart glasses offsetting VR volume declines

Key Financial Tables and Metrics

Revisions to Estimates and Earnings Outlook

2025-2027 earnings estimates have been raised by 1.0%/5.1%/5.6% to RMB 3,446m/4,014m/4,517m.
Adjustments reflect:
Higher shipment estimates for vehicle lens sets (VLS) and vehicle camera modules (VCM)
Lower shipment estimates for handset lens sets (HLS) and handset camera modules (HCM)
Higher ASP assumptions for HLS, VLS, and HCM
Higher margin assumptions for HCM, VCM, and optoelectronic products
Fine-tuned operating expense ratio

Valuation and Recommendation

– Target Price revised to HK\$115.00 (based on 28.3x 2026F PE, which is 0.5 standard deviations below the five-year historical forward mean) – BUY rating maintained – The company’s strong premiumization trend, robust margin outlook, and diversified growth drivers in vehicle and IoT spaces underpin a positive long-term narrative.

Balance Sheet and Cash Flow Highlights

Key Profitability and Growth Metrics (2024-2027F)

– EBITDA Margin: Rising from 18.3% (2024) to 20.5% (2027F) – Net Margin: Expanding from 7.0% (2024) to 8.9% (2027F) – ROE: Improving from 11.4% (2024) to 13.9% (2027F) – Turnover Growth: 20.9% (2024), 7.2% (2025F), 12.0% (2026F), 10.7% (2027F)

Risks and Considerations

– Downside risks include lower-than-expected shipment volumes for key product lines, margin pressure, and macroeconomic uncertainties. – The company’s diversified exposure to premium handset components, vehicle technologies, and emerging IoT applications helps mitigate single-market risk.

Conclusion

Sunny Optical remains a compelling growth story, anchored by strong earnings momentum, premiumization in its core handset and vehicle businesses, and successful expansion into new technology frontiers like LiDAR and smart glasses. With robust financials, a healthy balance sheet, and an increasingly diversified product mix, the company is well positioned to capture secular growth trends in imaging and optical technologies. UOB Kay Hian’s upgraded target price and continued BUY rating underscore the confidence in Sunny Optical’s long-term prospects.