Sunny Optical Technology - Pan-IoT cushions Android drag; Apple aperture sets up FY27 growth
Related Stories
- Sunny Optical Technology Group Co Ltd - Premium optics sustain GM; auto and Pan-IoT underpin FY2601 Apr 2026
- Sunny Optical Technology - Premium optics lift GM; auto momentum sets up 2H21 Aug 2025
- Sunny Optical Technology - 2H24 earnings surged 145%, in line; further gross margin improvement expected in FY2527 Mar 2025
1H26 revenue/net profit rose 12%/10% y/y, beating consensus by 8%/18%; GM of 19.5% was 0.2ppt ahead
Pan-IoT-led other-product revenue surged 89% y/y and beat by 54%; GM reached 34.4%, contributing one-third of group gross profit
Management maintains full-year guidance for ≥7% revenue/ earnings growth despite the results beat; cut FY26F/FY27F earnings by 11%/10% on prolonged Android weakness and higher actuator depreciation
Maintain BUY and TP of HKD110 on ; roll to 18x FY27F P/E, with Apple adjustable aperture, Pan-IoT driving the next leg
1H26 results highlights
Sunny Optical reported 1H26 revenue of RMB21.91bn, up 11.5% y/y, and net profit of RMB1.81bn, up 9.9% y/y. Gross profit increased 9.6% y/y to RMB4.27bn, while GM declined 0.3ppt y/y to 19.5%. Revenue, gross profit and net profit beat consensus by 8.2%, 9.1% and 17.6%, respectively, while GM was 0.2ppt above expectations. The earnings beat was driven primarily by stronger-than-expected Pan-IoT growth and disciplined opex, which offset continued handset and XR margin pressure.
Handset-product revenue declined 0.8% y/y to RMB13.15bn but was 3.2% above consensus. Lower handset camera-module shipments were largely offset by higher ASPs, supported by a richer premium-product mix and a higher contribution from the key overseas customer. However, handset GM declined 2.0ppts y/y to 12.3%, 0.5ppt below expectations, as lower Android volumes reduced camera-module utilisation and operating leverage.
Vehicle-product revenue increased 10.6% y/y to RMB3.76bn but was 7.2% below consensus. GM declined 3.2ppts y/y to 30.3%, although it was 1.2ppts above expectations. Growth was driven by vehicle cameras and other optical products, while product-mix improvement and internal efficiency supported margins. The proposed separate listing of Ningbo Sunny Smart Autotech remains under regulatory review.
XR revenue rose 11.0% y/y to RMB955.7mn, 4.3% above consensus, supported by smart-glasses and AR-related products. However, XR GM fell 4.3ppts y/y to 13.0%, 5.4ppts below expectations, reflecting the early-stage ramp of new optical engines and AR display products before sufficient production scale was reached. Monochrome and miniaturised optical engines continued to ramp, while ultra-thin full-colour AR display modules entered small-volume production.
Other-product revenue, mainly Pan-IoT, was the standout. Revenue surged 88.5% y/y to RMB4.04bn, beating consensus by 54.4%, while GM rose 1.3ppts to 34.4%, 3.2ppts above expectations. Segment gross profit almost doubled to RMB1.39bn and accounted for 32.6% of group gross profit, up from 18.2% in 1H25. Growth was broad-based across robotic vision, intelligent imaging, warehouse automation, optical instruments and semiconductor inspection. Sunny has moved beyond standalone optical components to supply modules, algorithms, computing platforms and integrated system solutions.
Management maintained its full-year group guidance, targeting no less than 7% y/y growth in both revenue and net profit. However, the expected business mix has shifted. Handset revenue is now expected to remain broadly flat y/y, as strong growth from the key overseas customer offsets weaker domestic Android demand. Other-product revenue, mainly Pan-IoT, is expected to grow by c.50%, versus the c.60% guide in March, while the XR outlook has improved from the previous expectation of a slight decline.
Our View
The results reinforce our view that Sunny’s earnings base is becoming less dependent on handsets. Pan-IoT-led other products now contribute approximately one-third of group gross profit, with growth broadening across robotic vision, intelligent imaging, industrial automation and semiconductor inspection. These businesses generally carry higher margins and greater system content than standalone handset components, improving the group’s earnings quality.
We expect Android to remain the principal near-term drag. The constraint is increasingly component availability rather than price alone, as memory supply is being redirected towards AI infrastructure. Low- and mid-tier models should remain most affected, pressuring handset volumes and camera-module utilisation. Samsung may be relatively resilient, as strong memory profits give the group greater capacity to defend smartphone market share and specifications, creating a potential share-gain opportunity for Sunny as customer qualification progresses.
We still expect the consumer-electronics optics upcycle to continue through 2027–28, but with a slower and more back-end-loaded recovery than previously anticipated. High-end upgrades in hybrid zoom, periscope, miniaturised modules and vertically integrated lens-and-actuator solutions remain intact. Premium devices should also be more resilient to component-driven price increases, making Apple increasingly important to Sunny’s next earnings leg.
The iPhone 18 Pro adjustable-aperture upgrade is the clearest catalyst. We expect Sunny to supply a dedicated aperture actuator alongside its high-end 7P lens, lifting combined content to c.2–3x that of a conventional high-end lens. However, newly installed actuator capacity will raise depreciation before utilisation and yields normalise. We expect a more meaningful margin and earnings contribution from FY27; key execution risks are product yields, customer qualification and production stability.
Pan-IoT, vehicle optics and XR provide additional growth engines. Robotic vision is expanding from components into cameras, depth perception, algorithms and complete systems, while AI microscopes, wafer-inspection equipment and warehouse automation broaden the addressable market. Vehicle optics should benefit from higher camera counts, pixel upgrades and vision-plus-LiDAR fusion. XR should become more meaningful from FY27 as non-display smart glasses scale and a major overseas AR project enters volume production.
Optical interconnect remains longer-term optionality. Sunny plans to focus on core optical elements, subassemblies and precision components rather than compete directly with existing optical-module customers. We view the opportunity as strategically credible given Sunny’s strengths in ultra-precision processing, micro-/nano-optics, glass moulding and high-volume manufacturing, although we do not assume a material near-term earnings contribution.
We cut our FY26F/FY27F earnings forecasts by 11.3%/10.1%, respectively, mainly to reflect: (i) lower Android smartphone shipment and camera-module utilisation assumptions under prolonged DRAM shortages; and (ii) higher-than-expected depreciation from newly installed adjustable-aperture actuator capacity ahead of the full FY27 ramp. Stronger Pan-IoT growth partly offsets these reductions.
Valuation
We maintain BUY and our TP of HKD110.0. We roll forward our valuation benchmark to FY27F EPS and apply 18x FY27F P/E, vs. 21x FY26F PE previously. The lower multiple reflects the weaker near-term earnings-growth profile and higher execution risk associated with new-product capacity. Key catalysts include improving adjustable-aperture actuator yields and utilisation, continued Pan-IoT outperformance, the FY27 ramp of major smart-glasses projects and further Apple optical-content gains
Access more at DBS Insights Direct
GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Bank (Hong Kong) Limited (“DBS HK”). This report is solely intended for the clients of DBS Bank Ltd., DBS HK, DBS Vickers (Hong Kong) Limited (“DBSV HK”), and DBS Vickers Securities (Singapore) Pte Ltd. (“DBSVS”), its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS HK.
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd., DBS HK, DBSV HK, DBSVS, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.
Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report.
This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned schedule or frequency for updating research publication relating to any issuer.
The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:
(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein.
Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.
Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report.
On 3 June 2021, President J. Biden issued Executive Order 14032 (“the EO”), superseding Executive Order 13959 of 12 November 2020. The EO, which takes effect on 2 August 2021, prohibits US persons from investing in publicly traded securities or derivatives thereof from firms listed as Chinese Military-Industrial Complex Companies (“CMICs”). The list of CMICs can be found on the US Department of the Treasury’s website at https://home.treasury.gov/policy-issues/financial-sanctions/consolidated-sanctions-list/ns-cmic-list.
DBS Vickers Securities (USA) Inc (“DBSVUSA”), a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.
RESTRICTIONS ON DISTRIBUTION
General | This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. |
Australia | This report is being distributed in Australia by DBS Bank Ltd, DBSVS or DBSV HK. DBS Bank Ltd holds Australian Financial Services Licence no. 475946. DBSVS and DBSV HK are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS Bank Ltd and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, and DBSV HK is regulated by the Hong Kong Securities and Futures Commission under the laws of Hong Kong, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors” within the meaning of the CA. |
Hong Kong | This report is being distributed in Hong Kong by DBS Bank Ltd, DBS Bank (Hong Kong) Limited and DBS Vickers (Hong Kong) Limited, all of which are registered with or licensed by the Hong Kong Securities and Futures Commission to carry out the regulated activity of advising on securities. DBS Bank Ltd., Hong Kong Branch is a limited liability company incorporated in Singapore. For any query regarding the materials herein, please contact Dennis Lam (Reg No. AH8290) at dbsvhk@dbs.com |
Indonesia | This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia. |
Malaysia | This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies. Wong Ming Tek, Executive Director, ADBSR |
Singapore | This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6878 8888 for matters arising from, or in connection with the report. |
Thailand | This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. |
United Kingdom | This report is produced by DBS HK which is regulated by the Hong Kong Monetary Authority This report is disseminated in the United Kingdom by DBS Bank Ltd, London Branch (“DBS UK”). DBS Bank Ltd is regulated by the Monetary Authority of Singapore. DBS UK is authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. In respect of the United Kingdom, this report is solely intended for the clients of DBS UK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS UK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication. |
Dubai International Financial Centre | This communication is provided to you as a Professional Client or Market Counterparty as defined in the DFSA Rulebook Conduct of Business Module (the "COB Module"), and should not be relied upon or acted on by any person which does not meet the criteria to be classified as a Professional Client or Market Counterparty under the DFSA rules. This communication is from the branch of DBS Bank Ltd operating in the Dubai International Financial Centre (the "DIFC") under the trading name "DBS Bank Ltd. (DIFC Branch)" ("DBS DIFC"), registered with the DIFC Registrar of Companies under number 156 and having its registered office at units 608 - 610, 6th Floor, Gate Precinct Building 5, PO Box 506538, DIFC, Dubai, United Arab Emirates. DBS DIFC is regulated by the Dubai Financial Services Authority (the "DFSA") with a DFSA reference number F000164. For more information on DBS DIFC and its affiliates, please see http://www.dbs.com/ae/our--network/default.page. Where this communication contains a research report, this research report is prepared by the entity referred to therein, which may be DBS Bank Ltd or a third party, and is provided to you by DBS DIFC. The research report has not been reviewed or authorised by the DFSA. Such research report is distributed on the express understanding that, whilst the information contained within is believed to be reliable, the information has not been independently verified by DBS DIFC. Unless otherwise indicated, this communication does not constitute an "Offer of Securities to the Public" as defined under Article 12 of the Markets Law (DIFC Law No.1 of 2012) or an "Offer of a Unit of a Fund" as defined under Article 19(2) of the Collective Investment Law (DIFC Law No.2 of 2010). The DFSA has no responsibility for reviewing or verifying this communication or any associated documents in connection with this investment and it is not subject to any form of regulation or approval by the DFSA. Accordingly, the DFSA has not approved this communication or any other associated documents in connection with this investment nor taken any steps to verify the information set out in this communication or any associated documents, and has no responsibility for them. The DFSA has not assessed the suitability of any investments to which the communication relates and, in respect of any Islamic investments (or other investments identified to be Shari'a compliant), neither we nor the DFSA has determined whether they are Shari'a compliant in any way. Any investments which this communication relates to may be illiquid and/or subject to restrictions on their resale. Prospective purchasers should conduct their own due diligence on any investments. If you do not understand the contents of this document you should consult an authorised financial adviser. |
United States | This report was prepared by DBS HK. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate. |
Other jurisdictions | In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions. |
HONG KONG DBS Bank (Hong Kong) Ltd Contact: Dennis Lam 13th Floor One Island East, 18 Westlands Road, Quarry Bay, Hong Kong Tel: 852 3668 4181 Fax: 852 2521 1812 e-mail: dbsvhk@dbs.com
| SINGAPORE DBS Bank Ltd Contact: Paul Yong 12 Marina Boulevard, Marina Bay Financial Centre Tower 3 Singapore 018982 Tel: 65 6878 8888 Fax: 65 65353 418 e-mail: groupresearch@dbs.com Company Regn. No. 196800306E |
THAILAND DBS Vickers Securities (Thailand) Co Ltd Contact: Chanpen Sirithanarattanakul 989 Siam Piwat Tower Building, 14th-15th Floor Rama 1 Road, Pathumwan, Bangkok Thailand 10330 Tel. 66 2 857 7831 Fax: 66 2 658 1269 e-mail: DBSVTresearch@dbs.com Company Regn. No 0105539127012 Securities and Exchange Commission, Thailand | INDONESIA PT DBS Vickers Sekuritas (Indonesia) Contact: Maynard Priajaya Arif DBS Bank Tower Ciputra World 1, 32/F Jl. Prof. Dr. Satrio Kav. 3-5 Jakarta 12940, Indonesia Tel: 62 21 3003 4900 Fax: 6221 3003 4943 e-mail: indonesiaresearch@dbs.com
|
|
|
Related Stories
- Sunny Optical Technology Group Co Ltd - Premium optics sustain GM; auto and Pan-IoT underpin FY2601 Apr 2026
- Sunny Optical Technology - Premium optics lift GM; auto momentum sets up 2H21 Aug 2025
- Sunny Optical Technology - 2H24 earnings surged 145%, in line; further gross margin improvement expected in FY2527 Mar 2025