Shares of Sunny Optical Technology Group have experienced a decline as the company announced that it anticipates a significant decrease in first-half profit. This can be attributed to a variety of factors, including China’s slow economic recovery and weak global demand for smartphones.
Sunny Optical shares fell by 14% to 67.20 Hong Kong dollars ($0.128), marking the company’s largest one-day loss in over four years. The Yuyao, China-based manufacturer of lenses and lens modules revealed that it expects its first-half profit to drop by 65%-70% compared to the prior-year period. This decline is a result of the slow economic recovery in China, weak demand, industrial competition, and the ongoing trend of smartphone cameras being de-specified.
The company reported that its first-half shipment volumes of handset lens sets and handset camera modules have decreased due to increased pressure on selling prices and gross profit margins. Additionally, the depreciation of the yuan has led to an unrealized foreign exchange loss of 161.5 million yuan ($22.3 million).
Analysts from Citi have downgraded their rating on Sunny Optical to neutral from buy and adjusted their target price to HK$80.00 from HK$110.00. This change reflects their expectations of continued weakness in smartphone demand. Citi predicts an 8% decline in global smartphone shipments this year, citing lackluster consumer confidence in China and concerns about a recession in developed markets.
Citi further anticipates that Sunny Optical will not meet its full-year shipment guidance, as smartphone vendors may hesitate to restock lenses until there is greater certainty in the global economy.
Overall, Sunny Optical Technology Group is facing significant challenges due to China’s slow economic recovery, weakened demand for smartphones, and competitive market conditions. As the company grapples with these obstacles, it remains uncertain how the future will unfold for this lens and lens module manufacturer.