More than a WPC (wireless power charging) play; more tricks up its sleeve    Sunway’s quarterly results beat expectations again, driven by GPM expansion,market share gain and ASP increase. Until now, we were focused primarily oniPhone’s WPC module as the key 2018growth drivers, but Sunway’s guidancenow suggests a much greater range of new businesses will be important in thelonger term, including VCM supporting frame, Lightning connectors and MIMOantenna. This is a positive surprise and prompts significant forecast revisionsand a raised valuation. Sunway targets to grow its dollar content per iPhonefrom sub-USD3now to USD10+ by 2019; retaining Buy.    Strong 3Q17results – record-high sales, GPM and EPS    Sunway reported 3Q17EPS of CNY0.32(+68% YoY; +57% QoQ) and operatingprofit of CNY392m (+103% YoY; +149% QoQ) on sales of CNY1.05bn (+43%YoY; +47% QoQ). Sales and EPS beat our estimate by 10%/28%, propelled byASP hike and GPM expansion (up 13ppt QoQ to 45.9%, vs. DBe of 35%). Thefirm attributes ASP hike to spec upgrade or design changes on new iPhone’santenna/EMI shielding case and new Galaxy Note’s WPC/NFC/MST module. Itattributes GPM strength to spec upgrades, product mix, production yield, andsome one-off items (molding/toolings and NRE, in our view).    Rosy 4Q17/2018outlook, driven by VCM frame, Lightning connector and WPC    Sunway is positive on both top-line and margin outlook. The companyhighlighted 45.9% GPM in 3Q17is not recurring, but it targets to achieve 35%-40% in coming quarters (vs. historical pattern of ~30%). Sunway expects 4Q17sales to follow seasonal pattern (~20%-25% QoQ growth), and 2018sales totop CNY7bn (80%+ YoY growth), driven by new iPhone projects, and to alesser extent, rising WPC penetration on Android OEMs. Sunway expects togenerate CNY2.5bn-3.0bn incremental sales (vs. our earlier estimate ofCNY1.5bn) from iPhone in 2018, driven by:(1) winning 6VCM supportingframe projects (ASP of USD1.2) in 2018vs. only 2projects in 2017;(2)penetrating into Lightning connector as the third supplier (likely less than 15%order allocation);(3) penetrating into WPC module (ASP of USD3.0) for 2018new iPhone with a 50% order allocation); and(4) mild market share gain incurrent products (antenna and EMI shielding cases).    Valuation and investment risks    We raise 2017/18/19EPS forecasts by 12%/33%/53% (better GPM and multiplenew iPhone projects) and increase TP from RMB45to RMB60. Our new TP isstill based on 35x PER, or 0.8x PEG (in line with regional peers). Risks: orderallocation loss; spec upgrade slowdown; and iPhone weakness.

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