Sunny Optical announced that CEO and Executive Director, Mr. Sun Yang has resigned from current roles due to health reasons, and Mr. Wang Wenjie (current Executive Director and Executive Vice President) has been appointed as his successor, effective from 26 Nov 2024. Mr. Wang worked in Sunny for over 35 years since his graduation in 1989. He was appointed as executive director in 2013, and is currently responsible for strategic planning and information management, as well as Sunny Optical Research Institute. Having spoken with the company, we believe the following is relevant: 1) the departure is Mr. Sun’s decision, 2) his relationship with the board is good, 3) it is not performance issue, 4) mgmt. expects a seamless transition. Overall, based on our discussions with investors, we do not think the news is being viewed as a major surprise to the market, although we expect near-term volatility in the stock price. We think Mr. Wang is well regarded internally at Sunny and externally by key stakeholders, including customers and major shareholders.
　　Mr. Wang Wenjie appointed as CEO. Prior to the CEO role, Mr. Wang is the Executive Director and Executive Vice President of Sunny Optical, and held several leadership positions over his 35-year tenure at the company. Most recently, he is responsible of Sunny’s strategic planning and information management, as well as management of Sunny Optical Research Institute. He was elected as the vice chairman of the Chinese Optical Society in 2017, responsible for advancing the development of optical industry in China.
　　Mr. Sun Yang to depart after 12 years as CEO. Mr. Sun has been the CEO at Sunny since 2012, and has worked in the company since 2002. During his tenure as CEO, Sunny’s revenue grew by 695% from RMB3.98bn in 2012 to RMB31.7bn in 2023, and the stock price increased by 19 times (85x at peak in 2021) during 2012-2024 YTD.
　　Company strategy and priorities unchanged. Broadly we do not expect a change in company strategy or priorities as a result of the transition. We believe Mr. Wang is an experienced, effective leader who could continue to lead Sunny on a growth path. Mgmt. remains focused on strengthening industry leadership and technology investment for long-term growth.
　　Valuation/Key risks. Maintain BUY with SOTP-based TP of HK$72.52, implying 24.9x FY25E P/E. Upcoming catalysts include AI phone upgrade cycle, camera spec upgrades and smartphone/AR&VR product launches.