After a profit surge of 71.9%, why is the market hesitant? The valuation dilemma of Sunny Optical

Bringing it at the tail end of the first quarter, Sunny Optical finally released its latest annual financial report, with full-year revenue of 43.23 billion yuan, a year-on-year increase of 12.9%; net profit surged by 71.9% to 4.64 billion yuan, significantly outperforming revenue growth.

However, the celebration of 4.6 billion yuan in profit cannot hide the anxiety and ambition during the transition period of old and new driving forces. Sunny Optical is standing at a dangerous crossroads: to the left is the stock game in the red ocean of smartphones, to the right is the starry ocean of AI and the physical world.

Therefore, when high profit growth and deep stock price retracement occur simultaneously, the market’s real concern has never been whether Sunny Optical makes money, but how long the old logic that underpins its growth can last. When will the new logic fully take over?

“Expectation Trap” After Profit Explosion: The Ceiling of Old Drivers and Cyclical Headwinds

Sunny Optical’s 2025 financial forecast looks almost impeccable on the surface: steady revenue growth, significant profit leap, improved gross margin, and abundant cash flow.

But the capital market seems to have too many doubts. After the earnings release, its Hong Kong stock price briefly surged but quickly fell back, continuing the downward trend of the past few months. This divergence between performance enthusiasm and stock price coldness is essentially a re-pricing of growth quality and sustainability.

Breaking it down, the smartphone business remains Sunny Optical’s core, and its high-end strategy has shown remarkable results. The division’s revenue grew 8.6% year-on-year to 27.32 billion yuan, with gross margin also improving, driven by high-value products like hybrid lenses and periscope modules, rising from 12.9% to 14.7%.

But behind the prosperity, we must be alert to multiple concerns. First, the stability of the smartphone core is fundamentally a “structural optimization-driven growth,” not an expansion driven by industry beta. In the context of global smartphone demand approaching saturation, the upgrade of lens specifications and the resulting increase in per-unit value are gradually offsetting the stagnation in shipment volume, but this offset has a ceiling.

More critically, the “gold content” of profits is a key issue. The profit explosion in 2025 includes about 900 million yuan of investment income, which is a non-recurring gain that temporarily boosted earnings. But the real valuation focus for investors is on the underlying operational growth after excluding these factors. In fact, the profit of this division grew in line with revenue throughout the year, both remaining in a stable state.

Second, cyclical headwinds are accelerating. The arrival of a storage supercycle not only raises the cost of complete devices but also changes the profit distribution mechanism in the consumer electronics supply chain. Brand manufacturers are offsetting pressure through price increases and supply chain cost compression. As a midstream optical component supplier, Sunny Optical is likely to become a passive participant in this cost transfer, with the risk of profit margins, which have been improved through high-endization, being squeezed.

Deeper pressure comes from demand-side expectations. Market judgments suggest that storage price hikes may lead to reduced production of mid- and low-end smartphones, and Morgan Stanley forecasts a 15% YoY decline in global smartphone shipments in 2026, with a larger drop in the Android camp. Against this backdrop, Sunny Optical will face “volume decline and profit shrinkage,” and combined with the high base in 2025, its profit elasticity in 2026 is likely to significantly diminish.

Therefore, the market’s caution is not denying Sunny Optical’s profitability but rather pre-pricing a more important fact: relying solely on the smartphone business can no longer support a complete valuation restructuring.

“Transition Vacuum” Between Old and New Drivers: Car-mounted is Real, AI Still Exploratory

The logic of the smartphone business is reaching a peak, and Sunny Optical’s hope is increasingly placed on new drivers. But the problem is, while new drivers have taken shape, they have not yet fully succeeded in taking over the old drivers. This “transition vacuum” is the core structural contradiction facing the company today.

From a practical contribution perspective, the car-mounted business is currently the most certain second growth curve. In 2025, this division continued its growth trend, increasing 21.3% to 7.33 billion yuan, with profits already exceeding half of the smartphone division. This achievement directly proves the company’s successful positioning in the wave of automotive intelligence.

As demand for visual perception in intelligent driving and cockpit interaction increases, the application scenarios for automotive optics are expanding continuously. This direction has long-term logic and industry consensus. As the global leader in automotive lenses, Sunny Optical has benefited from the rising penetration of automotive electronics.

However, even so, the car-mounted business faces rapid changes in competitive landscape. While Sunny Optical dominates in lens technology, in modules, lidar, and system solutions, it must contend with rapid catch-up from competitors like O-Film, Lianchuang Electronics, and face full-stack players like Huawei and Bosch.

This means the competition dimension is shifting from optical component capability upgrades to system integration ability, an area where Sunny Optical has been relatively weak in the past.

In contrast, XR and AI-related businesses are more aligned with long-term narratives. Although the company has accumulated technology in waveguides, micro-nano optics, and other fields, and has achieved nearly 2.4 billion yuan in revenue through partnerships along the supply chain, these segments have yet to enter a commercial explosion phase in terms of revenue growth and profitability.

In fact, AI glasses are predicted to be the next-generation mobile computing platform after smartphones, but they are still in a fuzzy stage of technology and product development. These products are far from the “adoption rate” race track, which limits their valuation support for the company.

Additionally, robotics and the broader IoT business, while offering broader application scenarios, also face the time test from technology validation to scale deployment.

In this context, 2026 is likely to be a “transition year” for Sunny Optical: old drivers remain under pressure, new drivers have yet to scale up, and both performance growth and valuation logic face a switch.

The company’s early-year share buybacks, signaling undervaluation, may be more about defending the valuation floor rather than confirming growth potential, given the industry’s uncertain trend.

More importantly, behind all these changes is a macro industry restructuring. AI is reshaping the profit distribution mechanism of the consumer electronics supply chain, shifting more from traditional manufacturing to “computing power + systems + platforms.”

Based on this insight, in just three months this year, Sunny Optical has made frequent moves—splitting off the automotive business, integrating XR ecosystems, and entering robotics—to build a “light + AI” new platform. But whether these strategies can truly hedge cyclical risks remains to be seen.

Valuation Rebuilding’s Critical Point: Building a “Light + AI” New Platform

At this moment, Sunny Optical is at a typical critical point of valuation restructuring.

On one hand, from a static valuation perspective, the current PE ratio of about 16x is in a relatively low historical range. Coupled with market expectations of around 8% profit growth in 2026, there is room for valuation recovery. The overall Hong Kong market, which tends to adjust after earnings season, has also amplified short-term volatility.

On the other hand, the market is clearly no longer willing to price it solely based on lens shipment volume. The previous valuation system centered on smartphone sales and specification upgrades is gradually losing effectiveness. Instead, a new valuation logic is emerging—who can become the core node of physical world entry in the AI era will be rewarded with higher premiums.

The management’s “see the world clearly, understand the world, participate in execution, and ultimately become the ‘eyes’ of Physical AI” three-step strategy clearly depicts its ambition to build a “light + AI” platform.

In other words, the company is trying to upgrade from a precision manufacturing enterprise to a platform company with system solution capabilities.

But all this takes time, and capital markets prefer to price verifiable growth. Whether it’s the independent capitalization of automotive optics or the long-term space of XR and robotics, Sunny Optical’s new story needs to be translated into clear revenue curves and profit contributions to truly achieve valuation leap.

Therefore, in 2026—a year of high costs—the most practical task for Sunny Optical is to accelerate the adjustment of its business structure, shorten the “time gap” of transitioning between old and new drivers, and strive to become a core asset in the era of full connectivity.