CICC released a research report stating that CONANT OPTICAL recently issued its 2025 performance forecast, with net profit expected to increase by no less than 30%. This is primarily driven by (1) increased sales of 1.74 high-index lenses and other multifunctional products; (2) the continued amplification of economies of scale and improved levels of mechanical automation; and (3) the optimization of its financing structure, leading to higher capital returns and lower financing costs. Considering the upward revision in performance and rising risk appetite within the sector, the target price has been raised by 12% to HK$65, corresponding to forecasted 2026 and 2027 price-to-earnings ratios of 40x and 30x, respectively, while maintaining an "Outperform" rating.
The report mentioned that regarding smart glasses, on January 15th, the Qianwen App announced full integration into Alibaba's ecosystem, which is expected to directly boost sales of the Kuake AI glasses equipped with Qianwen. The firm is optimistic that the company will continue to solidify its advantage in 1.74 high-index lenses and take a leading position in the consumer-grade smart glasses market.
CICC believes that the integration of the Qianwen model into Alibaba's ecosystem upgrades the life service functionalities of Kuake AI glasses. As the hardware carrier for this ecosystem, the practicality and user experience of Kuake AI glasses are set to improve, benefiting its market share and sales performance. Furthermore, the AI glasses market is experiencing rapid growth, with Meta planning to increase production of its Ray-Ban AI glasses. Leading brands are accelerating market adoption, creating growth opportunities for upstream supply chains. The firm is also optimistic about CONANT OPTICAL's continued efforts to strengthen its leading position as a core optical supplier.
Considering CONANT OPTICAL's strong sales of functional lenses, cost dilution from economies of scale, and a decline in financial expenses, CICC has raised its 2025 and 2026 net profit forecasts by 3% and 3%, to 566 million yuan and 701 million yuan, respectively. It has also introduced a 2027 net profit forecast of 916 million yuan for the first time. The valuation base has been shifted to 2026, with the current stock price corresponding to 2026/2027 P/E ratios of 37x and 28x.
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