J.P. Morgan raised its target price for Sunny Optical Technology (02382) to HK$125 from HK$110 but downgraded its rating to "neutral" from "overweight".
The research house thinks the share price reflects the market share gain and margin recovery theses, given the 82% share price outperformance year-to-date versus HSI. The 25x 2020 P/E is also on par with its average trading multiple.
Since Sunny focuses on the high-end CCM segment (65-70% of total revenue), Huawei smartphone uncertainties and unfavorable high-end camera module design changes should raise concerns about competition, cap Sunny's camera module margin expansion in the
longer term, and suppress a re-rating, JPM said.
JPM revised up its FY2019/20 sales forecasts by 10%/17% and EPS estimates by 11%/4% to factor in stronger 3Q and October monthly shipments of lenses and CCM (compact camera module).
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