CICC has released a research report maintaining its forecast for Sunny Optical's (02382) 2025/2026 net profit attributable to shareholders at RMB3.77 billion and RMB4.50 billion, respectively. The current stock price implies 2025/2026 P/E ratios of 18.5x and 15.3x. The firm reiterates an "Outperform" rating and a target price of HK$99.2, corresponding to 2025/2026 P/E ratios of 26.4x and 21.8x, representing a 42% upside from the current price.

Key highlights from CICC's report include:

**Recent Developments** Sunny Optical reported October shipment data: 1) **Mobile Optics**: Smartphone camera module shipments reached 44.997 million units, up 33.2% YoY but down 7.3% MoM. The YoY growth was driven by stronger customer demand. Smartphone lens shipments totaled 122 million units, up 5.7% YoY and 4.0% MoM, marking the first positive YoY growth this year. 2) **Automotive Products**: Automotive lens shipments stood at 12.217 million units, up 40.3% YoY and 4.8% MoM, primarily due to increased customer demand. 3) **Other Segments**: Shipments of other lenses and optoelectronic products declined 6.7% and 5.4% YoY, respectively.

**Mobile Optics Recovery Continues** From January to October, smartphone camera module and lens shipments fell 8% and 6% YoY, respectively. However, October shipments surged 33% and 6% YoY, aligning with CICC’s expectations. The improvement reflects both a lower base from last year and seasonal inventory buildup for Android devices. With ongoing product mix optimization, CICC expects Sunny Optical’s mobile optics ASP and gross margin to rise YoY and remain stable QoQ in 2H25.

Looking ahead to 2026, despite short-term memory price hikes, CICC believes Sunny Optical’s focus on mid-to-high-end markets provides resilience against raw material cost fluctuations.

**Steady Growth in Automotive Optics; AI and AR Glasses as Future Drivers** Automotive lens shipments grew 24% YoY in the first ten months, in line with expectations. CICC remains bullish on increasing camera adoption and higher specifications driven by advanced autonomous driving penetration.

For XR, CICC anticipates AI glasses’ camera modules to contribute steadily to Sunny Optical’s XR revenue in 2026, following upward revisions to Meta’s AI glasses shipment forecasts. Regarding AR glasses with displays, the strong market response to the Meta Ray-Ban Display (launched in September) underscores long-term growth potential. Sunny Optical’s subsidiary holds promising capabilities in diffractive waveguide technology.

**Risks**: Weak consumer electronics demand, slower-than-expected automotive智能化 adoption, and underwhelming XR demand.