Societe Generale Securities released a research report stating that maintaining the “buy” rating of Shunyu Optical Technology (02382), the company's revenue for 2024-2026 is 38.2/44.2/48.3 billion yuan, respectively, and net profit to mother is 2.541/3.246/3.645 billion yuan, respectively. The bank is optimistic about the growth of the mobile phone business under the trend of AI phones and high-end technology, and expects that under the impetus of AI, smart driving, smart cockpits, and AI glasses will gradually be implemented to increase demand for the number and specifications of lenses.

Societe Generale Securities's main views are as follows:

24H1 performance review:

The company announced its 2024 interim results, achieving operating income of 18.86 billion yuan (RMB, YoY +32.1%), higher than Factset's agreed expectations of 17.22 billion yuan. Revenue growth benefited from a recovery in the smartphone market and an increase in vehicle and VR business revenue. The company's gross profit was 3.25 billion yuan (YoY +52.4%) and net profit of 1.112 billion yuan (YoY +142.0%), higher than Factset's agreed expectations 1.033 billion yuan, net profit margin of 5.9% (YOY+2.7pcts), benefiting from improved profitability of mobile phone lenses and mobile camera modules.

Mobile phone business:

Demand for smartphones picked up in the first half of 2024, and the company's mobile camera module product structure improved. In the first 10 months of 2024, mobile phone lens shipments were 1.108 billion units (YoY +17.1%), and mobile camera module shipments were 0.443 billion units (YoY -5.4%). Looking ahead to the annual market performance, according to IDC, mobile phone shipments for the full year of 2024 are expected to reach 1.24 billion units, higher than the 1.2 billion unit forecast at the beginning of the year. Looking at the medium to long term, the bank is optimistic about the driving role of AI phones in the switching cycle and the trend of high-end mobile phones, and the company is expected to benefit as a leader in mobile phone lenses and camera modules.

In-vehicle business:

Vehicle lens shipments were 88.5 million pieces (YoY +11.6%) in the first 10 months of 2024. Looking ahead to the annual market performance, according to the Chaoden Think Tank report, global vehicle camera shipments are expected to be 0.34 billion units (YoY +30.8%) in 2024, and are expected to reach 0.42 billion units (YoY +23.5%) in 2025. Looking at the medium to long term, the bank believes that the development of smart cockpits, intelligent driving, and even Robotaxis will continue to improve the specifications and quantity of bicycle cameras and sensors, and the company is expected to maintain competitiveness in the automotive business through product innovation.

XR business:

Initial progress has been made in AI glasses in 2024. According to the WellsenNXR report, the annual sales volume of the representative product RaybanMeta is expected to exceed 2 million units in 2024. In addition, Shunyu Optical Technology is the camera module supplier for this product. Looking ahead to the medium to long term, the bank believes that AI applications will catalyze the growth of the AR glasses market. Recently, Baidu, Samsung and other companies have announced the layout of next-generation AR glasses. Among them, the value of optical devices is expected to become an important component of the material cost of AR terminal equipment.

Risk warning: 1) Consumer electronics recovery falls short of expectations; 2) Emerging businesses such as automotive and VR/AR are progressing less than expected; 3) geopolitical risks.