Sunny pre-announced net profit of RMB 2.64bn-2.75bn for 2024, up 140-150% YoY, with mid-point beating our/Bloomberg consensus estimates by 10%/10%, mainly due to smartphone market recovery, high-end/AI smartphone demand, strong NEV demand and rising adoption of intelligence driving. For 2025, we believe Sunny will continue to benefit from China subsidies and AI spec upgrade, acceleration of intelligence driving, and booming edge AI devices (e.g.
　　AI smart glasses). We expect earnings upgrade cycle to continue into 1H25E, and we raise FY25/26E earnings by 17%/14% to reflect the AI smartphone upgrade, intelligence driving trend and proliferation of edge AI. Our new FY25/26E EPS are 12%/12% ahead of consensus, and we lift our new SOTP- based TP to HK$102.89, implying 30.3x FY25E P/E (in-line with 10-year avg.P/E). Upcoming catalysts include AI smartphone launches, AI smart glasses and rising ADAS adoption.
　　2024 profit alert beat reaffirmed stronger earnings turnaround. Sunny released a FY24E positive profit alert, stating earnings growth of 140-150% YoY to RMB 2.64bn-2.75bn. Company attributes the growth to smartphone market recovery (esp. high-end models, AI hardware), better product mix, stronger NEV demand, and rising adoption of vehicle lenses on intelligence driving trend.
　　Multiple growth drivers: intelligence driving, AI smartphones, AI smart glasses. Looking ahead to 2025, we expect Sunny will benefit from a growing number of vehicle sensors (e.g. cameras, LiDAR, radars) driven by rising ADAS adoption, evidenced by BYD’s “God’s Eye” coverage expansion to most models (12 cameras, 12 ultrasonic radars). In addition, we expect China national subsidies and new AI features will boost smartphone replacement demand and spec upgrade. We also expect Sunny will be a major camera supplier for new AI glasses from leading brands, such as Meta, Xiaomi and Samsung.
　　More earnings upgrade ahead; Raise TP to HK$102.9. We believe recent stock rally reflected improving sector sentiment on the DeepSeek AI trend and BYD’s “intelligence driving” event, and Sunny’s earnings upgrade will continue to reflect faster ADAS adoption and edge AI cycle. We revise up FY25/26E EPS by 17%/14% on spec upgrade, intelligence driving trend and edge AI product launches. Our new SOTP-based TP of HK$102.9 implies 30.3x FY25E P/E, largely in-line with 32.6x 10-year avg. forward P/E.
　　Valuation
　　Maintain BUY with new TP of HK$102.89
　　We maintain BUY with new SOTP-based TP of HK$102.89. We derive our 12-month TP from the SOTP methodology and weighted-average target P/E multiple of 30.3x FY25EEPS, to reflect Sunny’s diversification in multiple businesses with different growth profiles,and visibility of product upcycles across different segments.
　　We assign 28x P/E to its CCM business to reflect its global No.1 position, AI product upcycle and technology leadership. We assign 38x P/E for its vehicle lens business to reflect high-margin and high-growth industry nature of vehicle lens, Sunny’s No.1 globalmarket share and accelerated ADAS adoption. We apply a 28x P/E to its handset lens segment given the secular upgrade trend and continued share gains from peers.