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On Tuesday, Jefferies analyst Jacky He adjusted the price target for Sunny Optical (OTC:SNPTF) Technology Group Co Ltd (2382:HK) (OTC: SNPTF) to HK$85.00, down from the previous HK$90.00, while keeping a Hold rating on the stock. According to InvestingPro data, the company has demonstrated strong performance with a 109% return over the past year and maintains healthy financials with more cash than debt on its balance sheet. The revision reflects concerns over the continued weak demand for smartphones, particularly in China, despite government subsidies aimed at boosting sales. The analyst noted that sales have remained tepid and channel inventory levels are still above normal. Despite these challenges, the company has maintained impressive revenue growth of 21% in the last twelve months, with total revenue reaching $5.2 billion.
He also pointed out that management’s guidance on growth related to the automotive sector is not particularly promising, potentially falling short of expectations. In light of these factors, Jefferies has revised its revenue and net profit forecasts for Sunny Optical for the years 2025E-27E, which remain 5% higher than consensus estimates.
The current valuation of Sunny Optical is based on a 22x/19x price-to-earnings (P/E) ratio for the years 2025E/26E. The new discounted cash flow (DCF)-based price target of HK$85.00 is calculated using a 10.7% weighted average cost of capital (WACC) and a 5.0% terminal growth rate. InvestingPro analysis reveals the stock is trading near its Fair Value, with a notably low PEG ratio of 0.22, suggesting attractive growth potential relative to its current valuation. Subscribers can access 8 additional exclusive ProTips and comprehensive financial metrics for deeper analysis. This valuation suggests a 24x P/E ratio for 2025E and a price/earnings to growth (PEG) ratio of 1.5x, indicating an estimated 10% potential upside for the stock.
The analyst’s comments highlighted a cautious outlook for Sunny Optical, emphasizing the lack of significant positive catalysts that could drive the stock’s performance in the near term. Despite the downward adjustment in the price target, the Hold rating suggests that Jefferies does not recommend selling the stock at this time but also does not see compelling reasons for new investments.
In other recent news, Sunny Optical Technology Group Co Ltd has seen varying assessments from major financial institutions. BofA Securities raised its price target for Sunny Optical from HK$75.00 to HK$102.00, maintaining a Buy rating. This revision is based on anticipated margin and earnings growth, driven by an increase in automotive momentum, particularly with BYD (SZ:002594), and an improved handset mix due to smartphone subsidies. BofA has also revised its earnings estimates for Sunny Optical upward by 7-15% for the years 2024 to 2026, following a stronger-than-expected profit alert for the second half of 2024.
Conversely, Citi analysts adjusted their outlook by lowering the price target to HK$98.00 from HK$102.00, while still endorsing the stock with a Buy rating. The adjustment follows Sunny Optical’s fiscal year 2025 performance forecasts, which met expectations in high camera module and vehicle guidance but fell short in handset lens shipment and gross margin. Citi analysts slightly decreased their earnings projections for Sunny Optical by 4% for FY25 and 2% for FY26. Despite these adjustments, Citi views Sunny Optical as a key player in the multi-camera systems and Advanced Driver Assistance Systems (ADAS) markets. Both firms recognize Sunny Optical’s strategic focus on automotive and smartphone sectors as pivotal to its future performance.
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