[I-bank focus]Sunny Optical to enjoy margin expansion - Macq

    Macquarie Research reiterates its high conviction "outperform" on Sunny Optical (02382) with street-highest price target of HK80 given margin expansion: better product mix, pixel mix, and yield rate, share gains in the China home market and its low base in handset lenses, and business enhancement from the low-margin camera module business to the high-margin handset/vehicle lens businesses.
  The research house expects the street to raise gross margin assumptions. Macquarie expects Sunny Optical to continue to gain share in its home town China from its low base (shipment at 379m in 2016 vs. Largan >1,000m based on its estimates). Sunny Optical also sees GM expansion via pixel migration, with 10Mpx+ only accounting for 29% of total shipments in 2016 vs. Largan already at 70~80%.
  Macquarie sees Sunny Optical continuing to enjoy GM expansion via business enhancement from the low-margin camera module business to the high-margin handset/vehicle lens
businesses. CMOS camera modules (CCM) shipments were YoY down from 41% in 2014 to 22%/18% in 2015-16, while Handset lens and Vehicle lens have continued to grow. The lower CCM shipments should better support the blended GPM given CCM's GM at ~10% vs. Handset Lens' >35% and Vehicle Lens' 40%.