Sunny's CCM/HSL shipment in Aug reached record-high of 56kk/ 132kk unit (+22%/46% YoY, 30%/31% MoM), mainly driven by Huawei recovery, Mate 30 order pull-in and Samsung Note10/A-series momentum, in our view. We expect Huawei/Samsung’s multi-cam adoption and new product launches will continue to boost volume/ASP growth in 4Q19E. We raised our FY19-21E EPS by 1-7% to reflect better HLS shipment/margin. Our SOTP-based TP was lifted to HK$140 for higher segment target multiples, which implies 27.5x FY20E P/E.
- CCM/HLS: Huawei recovery and Samsung A-series to boost shipment. Sunny’s CCM/HLS maintained strong growth of 22%/46% in Aug (vs 82%/23% in Jul), thanks to Huawei recovery, Samsung share gain and flagship restocking. Our check suggested that 1) Huawei is regaining share in EU/ China in 3Q19, 2) Samsung’s A-series models (A50, A10, A30) continue rapid global expansion (now 78% of Samsung mix), 3) Huawei share in China will exceed 45% in 4Q19E at the expense of Xiaomi/ Vivo. We believe these trends are positive in Sunny’s ASP/shipment growth in 2H19E.
- Beneficiary of Samsung/Huawei’s aggressive multi-cam adoption. Being the major CCM/HLS supplier to Samsung/Huawei, we believe Sunny will benefit from their strategy of aggressive multi-cam adoption. Samsung and Huawei are the only major brands adopting quad-cam YTD (5%/18% in Jul), and our study suggested Samsung/Huawei’s multi-cam penetration reached 75%/86% in Jul (vs 67% industry average). We expect Samsung A-series and Huawei Honor series will become major drivers in 4Q19E.
- Mate 30 launch and China 5G rollout as upcoming catalysts. Huawei is scheduled to launch Mate 30 series at Munich on 19 Sep, which will feature Kirin 990 SoC with 5G modem, fast wireless charging, triple-camera with 5x optical zoom and a 3D ToF camera for depth sensing. In addition, we expect China 5G service to launch in Oct, which will boost smartphone replacement and non-mobile 5G applications (AR, robot, smart retails) in next 3-5 years.
- Reiterate BUY and raised TP to HK$140. We revised up FY19-21E EPS by 1-7% and lifted SOTP-based TP to HK$140 for higher segment target multiples (22x/30x/35 for CCM/HLS/VLS). Implied FY20E P/E of 27.5x is 18% above 5-yr avg. P/E and 26% below 1-sd plus avg. P/E, which is justified for product upcycle in our view. We expect GPM recovery, multi-cam adoption, and ASP hike to drive 47%/53% YoY sales/NP growth in 2H19E. Sunny remains our top pick, given clear upgrade trend and strong earnings visibility.
