On Wednesday, Citi reaffirmed its positive stance on Sunny Optical Technology Group Co Ltd (2382:HK) (OTC: SNPTF (OTC:SNPTF)), maintaining a Buy rating and a stock price target of HK$79.00. The endorsement comes after Sunny Optical announced its full-year 2023 results, which aligned with both its previous forecasts and market consensus.
The company experienced a gross margin (GPM) shortfall in the second half of 2023, recording 14.1%, which Citi attributes to an increase in market share within the lower-end handset camera module (HCM) segment.
However, Sunny Optical saw a notable improvement in its optical component gross margin, which rose by 4.4 percentage points in the second half of the year compared to the first half, reaching 30.4%. This rebound suggests that the first half of 2023 was likely the lowest point for the company's optical component gross margin.
Looking ahead to 2024, Citi's outlook for Sunny Optical remains optimistic. The firm anticipates that Sunny Optical's continued market share gains in the HCM sector, coupled with a more favorable allocation of handset lens sets (HLS) in iOS products, will drive an increase in both gross margin and average selling price (ASP) for handset products. These factors are expected to contribute to a meaningful improvement in the company's financial performance.
Sunny Optical's recent financial release and Citi's subsequent rating highlight the company's resilience amid market challenges and its potential for growth in the coming year. The maintained Buy rating and stock price target reflect Citi's confidence in Sunny Optical's strategy and market position.
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