Hong Kong-based Sunny Optical Technology experienced a sharp drop in its shares following the announcement of a worse-than-expected decline in its 2023 net profit. The stock plummeted to 48.55 Hong Kong dollars (US$6.21) during the midday break, reaching its lowest point since February 2017, with an intraday low of HK$48.35.
The optical product manufacturer blamed the struggling Chinese economy’s slow recovery and fierce competition for its disappointing performance. According to Sunny Optical, its net profit for 2023 is projected to range between 1.08 billion yuan (US$150.90 million) and 1.20 billion yuan, representing a decline of 50% to 55% compared to the previous year.
Analyst Kyna Wong from Citigroup had initially expected the net profit for 2023 to exceed CNY1.4 billion, but has now reduced her estimate to CNY1.15 billion, marking a 7% decrease. However, Wong also suggested that Sunny Optical may witness improvements in production yields for high-end smartphone products in 2024, potentially benefiting from a resumption in the supply of modules to a major Android customer.
Citigroup maintains a buy rating on the company’s stock, setting a target price of HK$79.