Morgan Stanley: Sunny Optical — Fine-Tuning 2026/27 EPS Estimates
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Morgan Stanley updated its forecasts for Sunny Optical, incorporating the company's second-half 2025 results to fine-tune earnings per share estimates for 2026 and 2027 by 1.0% and 0.6%, respectively. Despite these modest upward revisions, the bank maintains an Equal-weight rating and a target price of HKD 62.00. The firm expects ongoing smartphone industry headwinds to constrain the company's growth momentum. Given Sunny Optical's high exposure to the Android ecosystem, it faces significant volume and pricing pressures throughout 2026.
The current valuation does not appear attractive, as Sunny Optical trades at 18 times forward earnings, representing a premium compared to peers such as Largan Precision at 15 times and Genius Electronic Optical at 14 times. The baseline target price of HKD 62.00 is grounded in a residual income model and sum-of-the-parts valuation, applying 19 times the 2026 EPS estimate. The bank's scenario analysis outlines a bull case target of HKD 100.00, assuming faster ADAS adoption and market share gains, and a bear case target of HKD 35.00, reflecting weak smartphone demand and intensifying competition.
Revenue growth across optical components and optoelectronic products, which expanded by 16.3% and 15.4% respectively in 2025, is projected to decelerate to approximately 10% in 2026. However, optical instruments are anticipated to see a substantial acceleration, growing 21.7%. Key catalysts for the stock include the upcoming annual shareholder meeting scheduled for late May 2026.