Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Equity Bottom-Up

Sunny Optical Technology Group / Equity Bottom-Up

<ul>
<li>The Hong Kong market trades about 30% below analysts' estimated 12 month target price.</li>
<li>Analysts are raising forecasts for<a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a> as it meets success with new phone rollouts and its EV business.  </li>
<li>
<a href="https://www.smartkarma.com/entities/sunny-optical-technology-group" target="_blank" data-smartkarma-citation="entities:13363:1" rel="noopener">Sunny Optical Technology Group (2382 HK)</a> had a positive profit alert and <a href="https://www.smartkarma.com/entities/minth-group-ltd" target="_blank" data-smartkarma-citation="entities:9232:1" rel="noopener">Minth Group Ltd (425 HK)</a> is showing growth in its international business. Both are rated BUY from analysts.</li>
</ul>


The Hong Kong market trades about 30% below analysts' estimated 12 month target price.
Analysts are raising forecasts forXiaomi Corp (1810 HK) as it meets success with new phone rollouts and its EV business.  

Sunny Optical Technology Group (2382 HK) had a positive profit alert and Minth Group Ltd (425 HK) is showing growth in its international business. Both are rated BUY from analysts.


BUY/SELL/HOLD: Hong Kong Stock Updates (July 22)

Senior Credit Analyst, Lucror Analytics

Trung Nguyen

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

Sunny Optical has released its FY 2023 numbers, which were weak but in line with expectations. Revenue declined 4.6% y-o-y to CNY 31.7 bn, due to lower shipments of handset-related products. Gross profit tumbled c. 30% to CNY 4.6 bn, with the margin shrinking to 14.5%. OCF plunged 64% to CNY 2.7 bn, while capex decreased slightly. FCF was therefore positive, albeit significantly lower. That said, the financial risk profile and liquidity remain healthy, supported by a large net cash position. We believe the industry operating environment will stabilise. The company marked seven consecutive months of double-digit shipment volume growth in February 2024, indicating that the recovery in the smartphone market is continuing. We expect shipments to stabilise at this level, which will represent a robust increase from the FY 2023 numbers. We project positive revenue and earnings growth in FY 2024.

  Sunny Optical has released its FY 2023 numbers, which were weak but in line with expectations. Revenue declined 4.6% y-o-y to CNY 31.7 bn, due to lower shipments of handset-related products. Gross profit tumbled c. 30% to CNY 4.6 bn, with the margin shrinking to 14.5%. OCF plunged 64% to CNY 2.7 bn, while capex decreased slightly. FCF was therefore positive, albeit significantly lower. That said, the financial risk profile and liquidity remain healthy, supported by a large net cash position.   We believe the industry operating environment will stabilise. The company marked seven consecutive months of double-digit shipment volume growth in February 2024, indicating that the recovery in the smartphone market is continuing. We expect shipments to stabilise at this level, which will represent a robust increase from the FY 2023 numbers. We project positive revenue and earnings growth in FY 2024. 

Sunny Optical - Earnings Flash - FY 2023 Results - Lucror Analytics

Leonard Law, CFA

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.<ul><li><a href='#lucror-entity-13363'>Sunny Optical Technology Group</a></li></ul>

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.Sunny Optical Technology Group

Morning Views Asia: Sunny Optical Technology Group

Equity Long-Short Analyst

Pyari Menon

Thematic (Sector/Industry)

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sunny-optical-tech" target="_blank" data-smartkarma-citation="entities:13363:1" rel="noopener">Sunny Optical (2382 HK)</a>  and <a href="https://www.smartkarma.com/entities/largan-precision-co-ltd" target="_blank" data-smartkarma-citation="entities:9126:1" rel="noopener">Largan Precision (3008 TT)</a> dominate the compact lens module market, but analysis of data from technical publications suggests very different strategies.</li>
<li>After lagging Largan significantly till 2016, Sunny Optical now leads in number of innovations, though the impact and quality of the innovations still materially lags Largan</li>
<li>Besides overcapacity the primary risk for the industry is whether at some some stage the benefits of "next-gen" lens modules fall below the "Noticeable Difference" threshold.</li>
</ul>



Sunny Optical (2382 HK)  and Largan Precision (3008 TT) dominate the compact lens module market, but analysis of data from technical publications suggests very different strategies.
After lagging Largan significantly till 2016, Sunny Optical now leads in number of innovations, though the impact and quality of the innovations still materially lags Largan
Besides overcapacity the primary risk for the industry is whether at some some stage the benefits of "next-gen" lens modules fall below the "Noticeable Difference" threshold.


Sunny Optical & Largan - Innovation Quantity Versus Quality

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

<ul>
<li>We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of July 19th.</li>
<li>The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.</li>
<li>We highlight flows for ICBC (1398 HK), China Hongqiao (1378 HK).</li>
</ul>


We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of July 19th.
The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.
We highlight flows for ICBC (1398 HK), China Hongqiao (1378 HK).


Hong Kong Connect Flows (Jul 19th): ICBC, China Hongqiao

China

Zhejiang Dahua Technology Co., Ltd. researches, designs and manufactures security and surveillance equipments. It also modular-designs both hardware and software with flexibility for different configurations, various scales of applications and future expansion.

WUS Printed Circuit (Kunshan) Co., Ltd produces and sells electrical equipments and related products.  The Company's products include double-side circuit board, multi-layers circuit board, and connector for electrical equipments.

Wus Printed Circuit (Kunshan) Co,Ltd. (002463 CH)

AAC Technologies Holdings Inc designs, develops and manufactures a broad range of miniaturized components that include speakers, receivers and microphones in the acoustic segment and others such as haptics vibrators, RF and antennas, and optical lenses. AAC's products are found in mobile devices such as smartphones, tablets, wearables, ultrabooks, notebooks and electronic book-readers.

Universal Scientific Industrial (Shanghai) Company Limited develops, procures, manufactures, provides logistics and maintenance services. The Company's main product types include communications, computer and storage, consumer electronics, industrial, and other related types.

Universal Scientific Industrial (Shanghai) (601231 CH)

Universal Scientific Industrial (Shanghai)

Unigroup Guoxin Co., Ltd., formerly Tongfang Guoxin Electronics Co., Ltd., is a China-based company, principally engaged in the design and distribution of integrated circuits (ICs). The Company's IC products consist of smart card chips, special IC products and memory chips. In addition, the Company also engages in the development, manufacture and distribution of quartz crystal components. The Company distributes its products within domestic market and to overseas markets.

Shengyi Technology Co., Ltd. manufactures and markets electronic components. The Company's products include copper coated panels, printed circuit boards, and other related products.

Lingyi iTech (Guangdong) Company manufactures magnetic material components. The Company develops, produces, and distributes ferrite permanent magnet components, ferrite soft magnet components, and other magnetic material components. Lingyi iTech (Guangdong) markets its products worldwide.

Chaozhou Three-Circle Group Co. Ltd. manufactures advanced ceramics. The Company researches, develops, produces, and sells ceramic ferrules, sleeves, substrates, capacitors, and other ceramic products. Chaozhou Three-Circle Group provides its products for optic telecommunication, machinery, environmental protection, and new energy industries.

Victory Giant Technology (Huizhou) Co., Ltd. manufactures electronic products. The Company specializes in high-density PCB development, production and sales.

Shennan Circuits Co.,Ltd. manufactures printed circuit boards. The Company produces packaging base plates, substrates, electronic assemblies, system in package, and other products. Shennan Circuits markets its products across worldwide.

Samsung Electro-Mechanics Co., Ltd. manufactures a variety of electronic components used in computers, audio and video products, industrial electronics, and telecommunication equipment. The Company's products include multi-layer boards and capacitors, optical Pick Ups, deflection yokes (DY), keyboards, speakers, and light emitting diode (LED) products.

Samsung Electro Mechanics Co, Ltd. (009150 KS)

Jentech Precision Industrial Company Ltd. provides tooling, precision metal stamping, custom insert molding, injection molding, and assembly solutions for medical, consumer electronics, semiconductor, automotive, appliance, and micro electronic markets to a wide variety of industries.

YASKAWA Electric Corporation manufactures and markets servomotors, controllers, inverters, and industrial robots.  The Company's products include spindle controllers, computerized numerical control (CNC) systems, and system engineering.

Insight Enterprises, Inc. offers information technology hardware, software, and services to large enterprises, small to medium sized businesses, and public sector institutions in North America, Europe, the Middle East, Africa, and Asia-Pacific.

FPT Corp is an information and communication technology company. The Company provides services in mobile distribution, systems integration, software outsourcing and development, Internet and e-media content, and computer assembly.

Dolby Laboratories Inc. develops audio signal processing systems for the motion picture, broadcasting, and music recording industries, as well as the consumer market.

Innolux Corporation manufactures TFT-LCD, LCD models and LCD monitors. The company also provides research, development, manufacturing and retails business.

LOTES Co., Ltd specialize in design and manufacture of connectors, CPU Socket, Coolers and Antenna for Notebook Computer, Personal Computer, Mobile electronic device and Ditial Video.

Arrow Electronics, Inc. distributes electronic components and computer products to industrial and commercial customers.  The Company distributes a variety of products including computer systems, peripherals, software, and mass storage products to original equipment manufacturers and commercial customers worldwide.

AU Optronics Corp. manufactures and markets thin film transistor-liquid crystal displays (TFT-LCDs) and plasma display panels (PDPs).  The Company sells its products in Taiwan and exports worldwide.

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)

BUY/SELL/HOLD: Hong Kong Stock Updates (July 22)

Xiaomi launches its new AI enabled phone and has success in EVs. Sunny Optical has seen its auto lens business grow and Minth is successfully...

David Mudd

Sunny Optical - Earnings Flash - FY 2023 Results - Lucror Analytics

Sunny Optical has released its FY 2023 numbers, which were weak but in line with expectations. Revenue declined 4.6% y-o-y to CNY 31.7 bn, due to...

Lucror Analytics

Morning Views Asia: Sunny Optical Technology Group

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region,...

Lucror Analytics

Sunny Optical & Largan - Innovation Quantity Versus Quality

Since 2016 Sunny Optical has ramped up innovations in compact lens modules at an exhilarating pace, but in terms of impact the innovations lag that...

Pyari Menon

Hong Kong Connect Flows (Jul 19th): ICBC, China Hongqiao

We analyzed southbound Hong Kong connect flows in the past week and highlight flows for ICBC (1398 HK), China Hongqiao (1378 HK).

Ke Yan, CFA, FRM

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