The latest: Smartphone camera lens producer Sunny Optical Technology (Group) Co. Ltd. (2382.HK) said Wednesday its net profit for the first half of 2023 will be between 407 million yuan ($56.3 million) and 475 million yuan, a year-on-year decrease of about 65% to 70%.

Looking up: The decline in the company’s profits was partly attributable to non-cash items unrelated to business performance, including an unrealized foreign exchange loss of 162 million yuan from depreciation of Chinese yuan.

Take Note: Due to slow recovery of China’s economy and uncertainty of global economy, demand in the smartphone market continued to be weak, resulting in a year-on-year decline in shipments of the company’s handset lens sets and handset camera modules, with increasing pressure on average selling prices and gross profit margins.

Digging Deeper: Founded in 1984, Sunny Optical is a leading manufacturer of integrated optical products and became the first Chinese optical company to be listed in Hong Kong in 2007. It has grown steadily since then on rapid development of the global smartphone market and was selected as a component of the benchmark Hang Seng Index in 2017. But its business hit a turning point in 2021 as the smartphone market matured. The situation further deteriorated last year, with its revenue and profit falling 11.5% and 51.7%, respectively. In 2023, its handset lens shipments dipped significantly until May and June, when they rebounded, but did little to salvage its first-half performance.

Market Reaction: Sunny Optical shares plunged on Thursday to close down 13.2% at HK$67.7 by the midday break. They now trade at the lower end of their 52-week range.

Translation by A. Au

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