Sunny Optical Slides After Guiding for Lower Profit, Weak Smartphone Lens Demand

By Sherry Qin

Shares of Sunny Optical Technology Group declined early Thursday after the company said it expects a sharp drop in first-half profit due to factors including China's slow economic recovery and weak global demand for smartphones.

Sunny Optical shares fell 14% to 67.20 Hong Kong dollars ($0.128), putting the Yuyao, China-based company on track for its biggest one-day loss in more than four years.

The maker of lenses and lens modules said Wednesday after market close that it expects first-half profit to drop 65%-70% from the prior-year period amid a slow economic recovery in China, weak demand, industrial competition and "the prolonged trend of de-specification of [the] smartphone camera."

The company's first-half shipment volumes of handset lens sets and handset camera modules fell amid increasing pressure on selling prices and gross profit margins, it said. Depreciation of the yuan also led to an unrealized foreign exchange loss of 161.5 million yuan ($22.3 million), Sunny Optical said.

Citi analysts downgraded their rating on Sunny Optical to neutral from buy and cut their target price to HK$80.00 from HK$110.00 to reflect expectations of prolonged weakness in smartphone demand.

Citi expects global smartphone shipments to drop 8% this year "given lackluster consumer confidence in China and overhanging recession concern in the developed markets."

The bank expects Sunny Optical to miss its full-year shipment guidance, saying smartphone vendors could hesitate to restock lenses until greater certainty returns to the global economy.

Write to Sherry Qin at sherry.qin@wsj.com

(END) Dow Jones Newswires

July 19, 2023 23:33 ET (03:33 GMT)

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