FY25E profit alert in-line; auto/smart glasses to offset smartphone weakness in 2026

舜宇光学科技(02382)\r

Sunny announced a FY25E positive profit alert with net profit growth of 70-75%YoY, driven by high-end spec upgrade, improved product mix and investmentincome from the deal for Goertek Optical Tech. Excluding one-off gains ofRMB919mn, mid-point of net profit is largely in-line with our/Bloombergconsensus estimates. For 2026, we expect the smart driving trend (autoVLS/CCM), AI/AR glasses ramp-up and high-end camera spec upgrade to driverevenue growth, offsetting smartphone weakness on memory cost pressure. Welower FY26-27E EPS by 1-4% to reflect smartphone industry headwinds. Ournew SOTP-based TP of HK$91.38 implies 23.4x FY26E P/E. Upcomingcatalysts include FY26E outlook/guidance, high-end spec upgrade, AI glasseslaunches and ADAS adoption.\r

FY25 positive profit alert in-line, driven by HLS/HCM spec upgrade andsolid VLS growth. Sunny announced a positive profit alert with earningsgrowth of 70-75% YoY, thanks to: 1) HLS/HCM ASP/GPM improvement dueto camera spec upgrade, 2) resilient auto lens shipment growth, and 3)investment income of RMB919mn from subsidiaries’ equity transfer inexchange for Goertek Optical Tech’s equity interests. Excluding one-offgains, mid-point of FY25 earnings is in-line with our/consensus estimates.In addition, we believe Goertek Optical Tech’s deal will accelerate Sunny’sXR business development given the former’s technology leadership inoptical waveguide for AI glasses and AR headsets.\r

FY26E outlook: smart driving (VLS/VCM) and AI/AR glasses to offsetsmartphone weakness. 1) Smartphone HLS/HCM: we expect HLS/HCMrevenue to decline 12%/12% YoY due to mid/low-end Android smartphoneweakness and inferior product mix (CMBI forecast: 5% YoY globalsmartphone shipment decline in FY26E). 2) Auto VLS/CCM: we expectrising penetration of L3/L4+ ADAS will benefit shipment/ASP and weforecast VLS/CCM revenue growth of 24%/30% YoY. 3) XR: we expectAI/AR glasses to ramp up rapidly in 2026-27E and Sunny is the keybeneficiary given its solid customer base (Meta/Google/Samsung/Apple).\r

Maintain BUY with lowered TP on smartphone headwinds. We lowerour FY26-27E EPS by 1-4% to reflect weaker HLS/HCM shipment/ASPamid smartphone industry headwinds on memory cost hike. Our new SOTPbased TP of HK$91.38 implies 23.4x rolled-over FY26E P/E. Reiterate BUY.