Sunny Optical recently published its semi-annual report for 2026, revealing a first-half (H1) revenue of approximately RMB 21.906 billion, marking an 11.5% year-on-year (YoY) increase. Gross profit climbed to about RMB 4.269 billion, up 9.6% YoY.

In terms of business segment performance, the mobile phone segment continued to be the largest revenue generator at RMB 13.149 billion, albeit experiencing a slight 0.8% YoY decline. The global smartphone market remained lackluster, with second-quarter (Q2) shipments falling between 6% and 11% YoY. Simultaneously, price increases for upstream components further constrained demand.

Fortunately, Sunny Optical countered the impact of reduced shipments by boosting the proportion of high-end products, elevating the average selling price (ASP) of camera modules, and thus stabilizing overall revenue. Nevertheless, segment profit plummeted from roughly RMB 1.9 billion to RMB 1.615 billion, a decrease of approximately RMB 285 million—the most significant drop on the income statement.

The shortfall was compensated for by the "Other Products" segment, whose revenue soared nearly 90%, rising from about RMB 2.143 billion to RMB 4.039 billion, with a gross margin of 34.4%, significantly surpassing the mobile phone segment's 12.3%.

The company revealed that growth was primarily propelled by robotics, smart imaging, and other pan-Internet of Things (IoT) products. Lawn mowing robots and warehouse automation robot projects achieved mass production, securing multiple new projects for complete machines and system solutions. High-end microscopy instruments made breakthroughs in AI medical applications, and semiconductor wafer defect detection equipment garnered recognition from top-tier clients. The gross profit contribution from other products surged from 18.2% to 32.6%, becoming the most crucial driver of profit growth.

Meanwhile, the automotive products segment, as the second-largest pillar, delivered steady performance, with revenue of RMB 3.762 billion, up 10.6% YoY, and segment profit remaining robust at approximately RMB 1.139 billion, nearly 70% of the mobile phone segment's profit. The 8-megapixel ADAS camera secured new design wins from multiple top automakers, the 17-megapixel product entered mass production, and the number of cameras per vehicle continued to rise with the penetration of L2+ autonomous driving, expanding the automotive optics market.

From a profit structure standpoint, the mobile phone segment's share dropped from roughly 66% to about 56%, while automotive and other products collectively accounted for nearly 50%. Sunny Optical is evolving from a "mobile optics leader" to a diversified precision optics platform.

Revenue from XR products reached RMB 956 million, up 11% YoY. Although modest in scale, the trajectory is clear. With AI deeply integrated into consumer hardware, smart glasses have entered a high-growth phase, and the company has developed full-stack capabilities spanning from optical components to integrated software-hardware systems.

Overseas markets also warrant attention, with North American revenue doubling YoY and European growth exceeding 40%. The revenue share from the China region declined from 71.9% to 68.9%, making overseas markets a pivotal growth engine.

In terms of profit quality, the group's overall gross margin dipped slightly by 0.3 percentage points to 19.5%, primarily due to pricing pressure in the mobile phone business. However, a 32.8% reduction in financing costs freed up RMB 80 million in financial flexibility, while operating expense ratios decreased from 12.3% to 11.0%, reflecting controlled research and development (R&D) and administrative spending.

Nevertheless, global minimum tax regulations led to a structural tax burden increase, with the effective tax rate rising from 7.6% to 11.5%. This additional cost is expected to persist in the future.

Compared to peers, Largan Precision and Genius Electronic Optical remain heavily reliant on mobile phone lens orders. Sunny Optical's distinction lies in leveraging diversified businesses to hedge against cyclical risks in the mobile phone industry. While mobile phone profits declined by nearly RMB 300 million, automotive products sustained RMB 1.1 billion in profit, and other products nearly doubled, contributing higher gross profit increments.

Management maintained full-year guidance of at least 7% revenue and net profit growth and significantly increased final dividend payouts, underscoring confidence in the transformation. From mobile phone lenses to an optics platform, Sunny Optical's profit restructuring may have just commenced.