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)

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>We hosted Sunny Optical at CMBI Technology Corporate Day on 25 Jun, with strong client interest and positive takeaways.</li><li>Key highlights: 1) smartphone market: mgmt. raised global/China smartphone shipment forecast by 1.7%/1.1% to 1.17bn/ 276mn (+3.5%/0.4% YoY) at Investor Day in Jun; 2) HCM/HLS: ASP/GPM recovery on track in 2024 driven by spec upgrade (e.g. AI phones), easing competition, high-end customer share gains and higher utilisation; 3) auto VLS: 40%+ GPM maintained and auto module growth to drive profitability; and 4) XR biz: diffractive waveguide to become mainstream in XR devices and positive on AR Glass as the next computing platform.</li><li>Overall, we believe Sunny will benefit from the next AI-driven spec upgrade cycle given its technology leadership, strong product roadmap and strong client base.</li></ul>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.

We hosted Sunny Optical at CMBI Technology Corporate Day on 25 Jun, with strong client interest and positive takeaways.Key highlights: 1) smartphone market: mgmt. raised global/China smartphone shipment forecast by 1.7%/1.1% to 1.17bn/ 276mn (+3.5%/0.4% YoY) at Investor Day in Jun; 2) HCM/HLS: ASP/GPM recovery on track in 2024 driven by spec upgrade (e.g. AI phones), easing competition, high-end customer share gains and higher utilisation; 3) auto VLS: 40%+ GPM maintained and auto module growth to drive profitability; and 4) XR biz: diffractive waveguide to become mainstream in XR devices and positive on AR Glass as the next computing platform.Overall, we believe Sunny will benefit from the next AI-driven spec upgrade cycle given its technology leadership, strong product roadmap and strong client base.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) - Positive on High-End Upgrade

<ul><li>We attended Sunny Optical’s Investor Day at its Yuyao headquarters.</li><li>Overall, while shipment guidance remained unchanged, we are encouraged by Sunny’s positive view on smartphone recovery and accelerated upgrade in high-end models in 2H24E.</li><li>Key highlights include 1) global No.1 position across smartphone HCM/HLS and auto lens sets, 2) breakthroughs in high-end ADAS/LiDAR/HUD markets (esp hybrid auto lens), 3) opportunities in visual inputs and edge AI (AI phone, robotics).</li></ul>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.

We attended Sunny Optical’s Investor Day at its Yuyao headquarters.Overall, while shipment guidance remained unchanged, we are encouraged by Sunny’s positive view on smartphone recovery and accelerated upgrade in high-end models in 2H24E.Key highlights include 1) global No.1 position across smartphone HCM/HLS and auto lens sets, 2) breakthroughs in high-end ADAS/LiDAR/HUD markets (esp hybrid auto lens), 3) opportunities in visual inputs and edge AI (AI phone, robotics).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) - High-End Upgrade to Accelerate in 2H24E

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

<ul><li>Sunny Optical (Sunny)’s FY23 net profit was largely in-line with profit warning, but 2H23 GPM of 14.1% (vs 19% in 2H22) was below expectations due to more intense competition despite spec upgrade and more high-end models in 2H23.</li><li>For 2024 guidance, while mgmt. is conservative on HCM/HLS/VLS shipment, Sunny is positive on smartphone ASP, high-end HLS ramp-up, stable VLS/XR growth, and better GPM recovery in 2H24E.</li><li>We trimmed FY24/25E EPS by 35%/27% to factor in weak 2023 GPM and conservative guidance. </li></ul>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 (Sunny)’s FY23 net profit was largely in-line with profit warning, but 2H23 GPM of 14.1% (vs 19% in 2H22) was below expectations due to more intense competition despite spec upgrade and more high-end models in 2H23.For 2024 guidance, while mgmt. is conservative on HCM/HLS/VLS shipment, Sunny is positive on smartphone ASP, high-end HLS ramp-up, stable VLS/XR growth, and better GPM recovery in 2H24E.We trimmed FY24/25E EPS by 35%/27% to factor in weak 2023 GPM and conservative guidance. 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) - Expectations Reset on Conservative Guidance; Maintain HOLD

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 (2382 HK) - Positive on High-End Upgrade

Overall, we believe Sunny will benefit from the next AI-driven spec upgrade cycle given its technology leadership, strong product roadmap and...

CMB International

Sunny Optical (2382 HK) - High-End Upgrade to Accelerate in 2H24E

Overall, while shipment guidance remained unchanged, we are encouraged by Sunny’s positive view on smartphone recovery and accelerated upgrade in...

CMB International

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

Sunny Optical (2382 HK) - Expectations Reset on Conservative Guidance; Maintain HOLD

Sunny Optical (Sunny)’s FY23 net profit was largely in-line with profit warning, but 2H23 GPM of 14.1% (vs 19% in 2H22) was below expectations due...

CMB International

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