Nomura on Sunway Communication: Satellite Clients to Drive Long-Term Growth
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Nomura has initiated coverage of Shenzhen Sunway Communication (300136.SZ) with a Buy rating and a target price of CNY 76, implying 23.5% upside. The firm projects 2024 to 2027 revenue and net profit CAGRs of 13% and 23%, respectively, primarily driven by growing satellite business contributions.
The target price is based on 70x 2026 estimated P/E, a 2.2 standard deviation premium over the historical average, reflecting increasing content value and long-term satellite prospects. In consumer electronics, Sunway's premium client mix, including Apple and Huawei, provides resilience despite an expected 1.7% decline in global smartphone shipments for 2026. Content value expansion includes steel-shell battery castings and transparent antennas.
The satellite business is the most profitable segment, boasting a gross margin of 35% to 40% in 2025, compared to the group average of approximately 21%. Sunway has secured supply agreements with two US clients and two domestic low-earth orbit constellation operators. Client B is particularly noteworthy, entering the deployment phase in 2026 with exclusive supplier status and significantly higher content value per unit.
Management targets CNY 10 billion in satellite revenue by 2030, representing a six to sevenfold increase from 2025. Key risks include geopolitical policy shifts and potential shipment weakness from major clients.