Research from Quam Securities, Quam Securities

Quam Securities Research

Research from Quam Securities

Quam Securities

Since its inception in 1986, Quam Securities Limited (Quam Securities) has grown to become one of the few mid-tier securities brokerages in Hong Kong with global execution capabilities for both private and institutional clients. It boasts a well-established network in Greater China including Taiwan and in major world markets through the Global Alliance Partners (GAP). Quam Securities is well-positioned not only to harness and drive business within the China Tonghai International Financial Limited but also between China and the world markets.

Thematic (Sector/Industry)

<div><div><div><div><ul><li>Despite shipment continued to fall y/y, all major markets experienced deceleration in decline.</li><li>DMs like US &amp; W Europe did better with more material deceleration, which helped Apple to solidify its market position.</li><li>EMs remained weak with APAC (ex-Jap &amp; China), CEE and MEA falling 17-20% y/y, which was a bigger headache to the Android camp, especially the Chinese players, among which, Xiaomi had relatively poorer performance.</li></ul></div></div></div></div>

Despite shipment continued to fall y/y, all major markets experienced deceleration in decline.DMs like US &amp; W Europe did better with more material deceleration, which helped Apple to solidify its market position.EMs remained weak with APAC (ex-Jap &amp; China), CEE and MEA falling 17-20% y/y, which was a bigger headache to the Android camp, especially the Chinese players, among which, Xiaomi had relatively poorer performance.

Smartphone – Global Vs China Decelerated Downtrends

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>After a strong rally driven by AI/ChatGPT theme in past three months (note in Feb), we believe most near-term positives have been priced in AI-tech value chain (+65%/146%/45%/62% YTD for chip/optical/PCB/server), and we expect profit-taking pressure ahead of 1Q23 earnings season in late April.</li><li>We suggest to switch into three themes we addressed in Jan (note) which will continue to drive supply chain opportunities into 2Q23E, including demand recovery, MR innovation and localisation.</li><li>We recommend to focus on recovery plays (Sunny Optical, SG Micro and 3Peak), innovation (Cowell, Luxshare, Goertek for MR) and semi localization (Hua Hong Semi, NAURA, AMEC).</li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

After a strong rally driven by AI/ChatGPT theme in past three months (note in Feb), we believe most near-term positives have been priced in AI-tech value chain (+65%/146%/45%/62% YTD for chip/optical/PCB/server), and we expect profit-taking pressure ahead of 1Q23 earnings season in late April.We suggest to switch into three themes we addressed in Jan (note) which will continue to drive supply chain opportunities into 2Q23E, including demand recovery, MR innovation and localisation.We recommend to focus on recovery plays (Sunny Optical, SG Micro and 3Peak), innovation (Cowell, Luxshare, Goertek for MR) and semi localization (Hua Hong Semi, NAURA, AMEC).Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Technology – Switching from AI/ChatGPT to Demand Recovery

Equity Bottom-Up

Sunny Optical Technology Group / Equity Bottom-Up

<ul><li>We hosted a NDR for investors with Sunny Optical on 27 Mar.</li><li>Mgmt. reiterated 2023 shipment guidance with gradual recovery but ASP/GPM of handset-related products were under pressure in 1H23E given camera de-spec trend.</li><li>Looking ahead, mgmt. is positive on 1) demand recovery in 3Q23E on smartphone replacement cycle, 2) AR/VR growth of 30% YoY in FY23E and 3) rising ADAS adoption to drive ASP/GPM upside in FY24-25E. Trading at 28.1x/24.3x FY23/24E P/E, we think the stock is fairly valued. Maintain HOLD with SOTPbased TP of HK$86.75.</li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

We hosted a NDR for investors with Sunny Optical on 27 Mar.Mgmt. reiterated 2023 shipment guidance with gradual recovery but ASP/GPM of handset-related products were under pressure in 1H23E given camera de-spec trend.Looking ahead, mgmt. is positive on 1) demand recovery in 3Q23E on smartphone replacement cycle, 2) AR/VR growth of 30% YoY in FY23E and 3) rising ADAS adoption to drive ASP/GPM upside in FY24-25E. Trading at 28.1x/24.3x FY23/24E P/E, we think the stock is fairly valued. Maintain HOLD with SOTPbased TP of HK$86.75.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Sunny Optical (2382 HK) – NDR Takeaways: A Bumpy 1H23 Ahead

<ul><li>We are incrementally more positive on the stock after earnings call, as we believe market is too bearish on HCM/HLS outlook and underestimate automobile/XR potential upside in FY23E.</li><li>However, we believe a bumpy 1H23 will remain the major overhang for the stock given sluggish HCM/HLS shipment/GPM, and we trimmed FY23-24E EPS by 10-14% to reflect weaker margins.</li><li>Our new EPS are 14-21% below consensus. Trading at 27.4x/23.7x FY23/24E P/E, we think the stock is fairly valued. Maintain HOLD with lowered SOTP-based TP of HK$86.75.</li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

We are incrementally more positive on the stock after earnings call, as we believe market is too bearish on HCM/HLS outlook and underestimate automobile/XR potential upside in FY23E.However, we believe a bumpy 1H23 will remain the major overhang for the stock given sluggish HCM/HLS shipment/GPM, and we trimmed FY23-24E EPS by 10-14% to reflect weaker margins.Our new EPS are 14-21% below consensus. Trading at 27.4x/23.7x FY23/24E P/E, we think the stock is fairly valued. Maintain HOLD with lowered SOTP-based TP of HK$86.75.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Sunny Optical (2382 HK) – Strong  auto/XR pipeline to weather smartphone headwinds

<ul><li>Sunny’s 2H22 net profit decline of 54% YoY is in-line with expectations, while revenue exceeds our/consensus estimates by 25%/9%, mainly due to better ASP and product mix.</li><li>2H22 GPM came in at 19.0%, vs 20.8% in 1H22 due to lower HCM/HLS/VLS GPM.</li><li>We expect 1H23E outlook will remain under pressure given on-going inventory correction, smartphone demand recovery uncertainty and global EV sales slowdown. </li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

Sunny’s 2H22 net profit decline of 54% YoY is in-line with expectations, while revenue exceeds our/consensus estimates by 25%/9%, mainly due to better ASP and product mix.2H22 GPM came in at 19.0%, vs 20.8% in 1H22 due to lower HCM/HLS/VLS GPM.We expect 1H23E outlook will remain under pressure given on-going inventory correction, smartphone demand recovery uncertainty and global EV sales slowdown. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Sunny Optical (2382 HK) – 2H22 first take: weakness in-line; awaiting recovery

China

Sunny Optical Technology Group Co., Limited designs and manufactures optical and optical related products. The Company's products include glass/plastic lenses, prisms, mobile phone camera modules, microscopes, surveying instruments, and other analytical instruments.

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Sunny Optical Technology Group (2382 HK)

Smartphone – Global Vs China Decelerated Downtrends

Despite shipment continued to fall y/y, all major markets experienced deceleration in decline. DMs like US & W Europe did better with more material...

Quam Securities

China Technology – Switching from AI/ChatGPT to Demand Recovery

After a strong rally driven by AI/ChatGPT theme in past three months (note in Feb), we believe most near-term positives have been priced in AI-tech...

CMB International

Sunny Optical (2382 HK) – NDR Takeaways: A Bumpy 1H23 Ahead

Mgmt. reiterated 2023 shipment guidance with gradual recovery but ASP/GPM of handset-related products were under pressure in 1H23E given camera de...

CMB International

Sunny Optical (2382 HK) – Strong auto/XR pipeline to weather smartphone headwinds

We are incrementally more positive on the stock after earnings call, as we believe market is too bearish on HCM/HLS outlook and underestimate...

CMB International

Sunny Optical (2382 HK) – 2H22 first take: weakness in-line; awaiting recovery

Sunny’s 2H22 net profit decline of 54% YoY is in-line with expectations, while revenue exceeds our/consensus estimates by 25%/9%, mainly due to...

CMB International

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