Sunny Optical's lens shipment fell 10% to 7.8m

Blame it on weak demand for digital cameras in Japan.

Sunny Optical reported its January shipment after market close yesterday. According to Maybank Kim Eng, lenses and lens sets shipment reduced by 10% YoY to 7.8m, which was 21% above its estimate. Management said the shipment drop was due to the weak demand for digital cameras in Japan. 

However, Sunny Optical's handset camera module shipment increased by 68% YoY to 11.1m, which was 27% above Maybank's estimate. It adds, management explained the strong volume growth was mainly attributable to the rapid growth of smartphones. 

Here's more:

Share price has gone up by 34% to HKD7.32 since we last upgraded our earnings estimate and target price in January and is currently trading at 12x PER of our FY13F estimate (our FY13F net profit estimate is 10% above consensus). 

While we are currently reviewing our estimates and target price (current TP: HKD6.60), we keep our view that the strong revenue growth is in sight on sales mix upgrade with better ASPs, and the strong 2H12F result, due in mid-March, will trigger more upward earnings revisions.

Nevertheless, we notice that the recent change of turning more 2G subscribers into 3G by the PRC telcos may have triggered a stronger-than-expected demand of Chinese-brand and entrylevel smartphones in China.

Given that Sunny Optical is the major optical component supplier of the Chinese brand smartphone vendors, we stay positive on its earnings growth prospect.