Sunny Optical shares hit all-time high on strong interim earnings growth

Shares of Sunny Optical Technology, mainland China’s largest manufacturer of smartphone camera modules and lenses, surged to a record high on Monday ahead of its report of hefty interim earnings growth.

Sunny Optical’s shares rose 7.6 per cent to finish the day’s trading at HK$103.80, its highest close since the company was listed in Hong Kong in 2007.

“Although global economic growth remains uncertain, the group remains optimistic about its future operations,” company founder and chairman Ye Liaoning said in a regulatory filing after the market closed.

Net profit for the six months ended June 30 rose 149.7 per cent to 1.2 billion yuan (US$180 million), up from 465.3 million yuan in the same period last year, due to higher gross profit and more stringent control of operating expenses.

Gross profit, or net sales minus the cost of goods sold, climbed 109.5 per cent in the second quarter to 2.1 billion yuan from 987.9 million yuan a year ago.

Total revenue advanced 69.8 per cent to about 10 billion yuan, compared with 5.9 billion yuan a year earlier, on the back of higher volume of smartphone and vehicle lens shipments, as well as increases in their average selling price.

“We believe Sunny Optical has continued to achieve market share gains especially in dual-camera handset lens sets (HLS), reflected by its 81 per cent year-on-year HLS shipment growth [to 261.6 million pieces] during the first-half of this year,” said Citi Research analyst Mark Li.

Jefferies equity analyst Rex Wu said that indicated mainland China’s smartphone market has completed inventory adjustments, and that demand will mainly benefit major industry players like Sunny Optical.

Data from research firm IDC showed that global smartphone shipments totaled 689 million units in the first half of this year, while the shipment volume on the mainland reached 215.9 million units in the same period.

Founded in 1984 in Yuyao, Zhejiang province, Sunny Optical is a key supplier to major Chinese smartphone brands Huawei Technologies, Oppo and Vivo.

Its main competition is Taiwan-based Largan Precision, the world’s largest maker of handset lenses and a major supplier to Apple’s iPhone.

“Sunny Optical has been catching up with Largan over the past few years,” said Bernstein senior analyst David Dai. He pointed out that Sunny Optical’s technological gap with Largan is “narrowing to less than one year”, compared to three to two years before.

Research and development expenditure at Sunny Optical in the January to June period grew 95.6 per cent year-on-year to 535 million yuan, according to the company.

Apart from its efforts in optical technologies, Sunny Optical’s Ye said the company will sharpen its focus in the fields of augmented and virtual reality, biometric identification and artificial intelligence.