Sunny Optical 2026 Investor Day: Automotive and smartphones remain the main pillars, while optical communications gains importance

Overview

This report is Morgan Stanley's event commentary on Sunny Optical's 2026 Investor Day. The core message is that traditional smartphone and automotive businesses still determine revenue and earnings in the short to medium term, while the importance of optical communications is rising significantly, and AI glasses/MR plus humanoid robot components constitute long-duration growth options.

Core views

The report believes Sunny Optical will leverage its optical capabilities to enter the optical communications market and expects revenue from optical transceivers starting in 2027. Penetration of automotive lenses and LiDAR continues to rise, supporting growth in the automotive business; smartphone demand, especially from Android customers, is under pressure, but demand from North American customers remains healthy. Compared with the March guidance, progress in EV-related business is in line with expectations, the smartphone business faces industry headwinds, and the strategic importance of the optical communications business has increased.

Analysis framework

The analysis is centered on management commentary from Investor Day, growth drivers by business segment, and the rating and valuation framework, with a focus on comparing the contributions of smartphones, automotive, optical communications, AI glasses/MR, and humanoid robot components to revenue, earnings, and long-term growth potential.

Methodology notes

• Valuation methodsResidual Income Model (RIM) and Sum-of-the-Parts (SOTP)

  The base-case scenario uses an SOTP approach derived from RIM.

  Morgan Stanley uses RIM to value its covered Greater China technology hardware companies, while also using SOTP to reflect differences across Sunny Optical's businesses in terms of growth and return characteristics; the assumed cost of equity is 11%.

• RatingMorgan Stanley relative rating system

  Equal-weight means the expected risk-adjusted total return over the next 12-18 months is roughly in line with the average level across the industry coverage universe.

  Equal-weight in the report is not equivalent to a simple 'Hold' in the traditional buy/hold/sell framework, but rather reflects the recommended weighting relative to the analyst's industry coverage universe.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Sunny Optical (2382.HK)

  Covered company

  Strengths

  It has accumulated optical technology expertise, and automotive lenses, LiDAR, optical communications, and AI terminal components provide diversified growth paths.

  Weaknesses

  Demand related to smartphones, especially from Android customers, faces industry headwinds.

  Comparison

  The report does not provide explicit quantitative peer comparisons, but the rating framework indicates its expected return over the next 12-18 months is close to the average level across the industry coverage universe.

  Risks

  Weak industry demand, intensified competition in smartphone lenses/CCM, and automotive growth coming in below expectations.

• Smartphone-related business

  Key source of revenue and earnings in the short to medium term

  Strengths

  Demand from North American customers remains healthy, and revenue growth is progressing as planned.

  Weaknesses

  Demand from Android customers is under pressure, and industry headwinds may affect growth and gross margin.

  Comparison

  Compared with automotive and optical communications, the smartphone business is more mature but faces greater growth pressure.

  Risks

  Weak demand, intensified competition, and improvement in CCM and lens gross margins falling short of expectations.

• Automotive lens and LiDAR business

  Core growth business

  Strengths

  Penetration of automotive lenses and LiDAR continues to rise, and the business maintains positive growth momentum.

  Weaknesses

  Overall growth in the automotive industry is below expectations.

  Comparison

  Compared with the smartphone business, the automotive business has higher growth rate assumptions.

  Risks

  Automotive-related growth coming in below expectations.

• Optical communications business

  New growth driver

  Strengths

  The company plans to leverage its optical capabilities to enter optical communications and expects optical transceivers to generate revenue in 2027.

  Weaknesses

  It is still in the R&D and market development stage, and revenue realization will take time.

  Comparison

  Compared with the March guidance, the report believes the importance of the optical communications business has increased.

  Risks

  Product development, customer onboarding, or revenue realization progressing more slowly than expected.

• AI glasses/MR and humanoid robot components

  Long-term growth option

  Strengths

  The company believes the TAM for AI glasses/MR could reach Rmb100bn over the next decade, and views humanoid robots as the ultimate form of embodied AI.

  Weaknesses

  The pace of commercialization and earnings contribution remains uncertain.

  Comparison

  Compared with the smartphone and automotive businesses, this is more of a long-term optionality play.

  Risks

  Breakthroughs in MR/smart glasses falling short of expectations, or end demand or supply-chain adoption progressing more slowly than expected.

Key data

• Stock ratingEqual-weightStock Rating disclosed on the cover page.
• Industry viewIn-LineIndustry View disclosed on the cover page.
• Target priceHKS62.00Implies about -18.3% downside versus the June 24, 2026 closing price of HKS75.90.
• Closing priceHKS75.90Share price on June 24, 2026.
• 52-week rangeHKS91.40-51.50Disclosed on the cover page.
• Market capitalizationRmb71,852.0mnDisclosed on the cover page.
• Enterprise valueRmb72,261.0mnDisclosed on the cover page.
• Average daily trading valueHKS871mnDisclosed on the cover page.
• Cost of equity assumption11%Used in the RIM/SOTP valuation methodology.
• Mid-term growth rate assumptionsHandsets -6%, automotive 11%, AR/VR 16%Mid-term growth rates by business segment disclosed in the valuation methodology.
• Long-term growth rate assumptionsHandsets 3%, automotive 5%, AR/VR 5%Long-term growth rates by business segment disclosed in the valuation methodology.
• Timing of optical transceiver revenue2027Management expects optical transceivers to contribute revenue in 2027.
• AI glasses/MR potential marketRmb100bnThe company believes the TAM for AI glasses/MR could reach this scale over the next decade.

Impact & implications

For investors, this Investor Day reinforces the thesis that Sunny Optical is expanding from traditional smartphone optics into automotive optics, optical communications, and AI terminal components, but the current rating and target price show Morgan Stanley remains relatively cautious on the stock's relative return. Near-term focus is on smartphone demand headwinds and delivery of automotive growth, while longer-term focus is on whether optical communications and AI glasses/MR can form meaningful revenue and profit contributions.

Risks

• Weak industry demand suppressing gross margins.
• Intensified competition in smartphone CCM and lenses.
• Growth in automotive-related business coming in below expectations.
• Commercialization of optical communications, AI glasses/MR, or humanoid robot components progressing more slowly than expected.
• The target price is below the current share price, indicating pressure on valuation or relative returns.

What to watch

• Whether optical transceiver revenue can materialize on schedule in 2027.
• Whether rising penetration of automotive lenses and LiDAR continues to translate into revenue and profit growth.
• Whether demand from Android customers improves, and whether growth from North American customers continues.
• Whether the AI glasses/MR market approaches the expected Rmb100bn TAM.
• Whether gross margins for smartphone CCM and lenses improve.
• Whether Morgan Stanley subsequently adjusts its Equal-weight rating or HKS62.00 target price.