CICC: Raise CONANT OPTICAL (02276) target price by 12% to HK$65, raise earnings forecast.

Zhongjin released a research report stating that CONANT OPTICAL (02276) recently released a performance forecast for 2025, with a projected increase in net profit of no less than 30%, mainly due to (1) an increase in sales of 1.74 refractive index lenses and other multifunctional products; (2) continued enlargement of scale effects and improvement in mechanical automation level; (3) optimization of financing structure, increase in fund returns, and reduction in financing costs. Considering the upward adjustment in performance and sector risk preference, the target price was raised by 12% to HK$65, corresponding to forecasted P/E ratios of 40x and 30x for 2026 and 2027, respectively, maintaining an "outperform industry" rating. The report mentioned that in the area of smart glasses, on January 15th, Qianwen App announced complete integration with Alibaba's ecological business, which is expected to directly drive sales of Quark AI glasses that carry Qianwen. The report is optimistic about the company continuing to consolidate its advantage in 1.74 refractive index lenses and taking the lead in the consumer-grade smart glasses market. Zhongjin believes that the integration of Qianwen's model into the Alibaba ecosystem will upgrade the life service functions of Quark AI glasses. As a carrier of the ecosystem in the hardware end, the practicality and user experience of Quark AI glasses will be improved, which will benefit its market share and sales performance. In addition, the AI glasses market is growing rapidly, with Meta planning to expand production of Ray-Ban AI glasses. Leading brands accelerating market popularization will bring growth opportunities for the upstream supply chain. The report is also optimistic about CONANT OPTICAL continuing to consolidate its leading advantage as an optical core supplier. Considering the improvement in sales of functional lenses at CONANT OPTICAL, the cost dilution under scale effects, and the decrease in financial expenses, Zhongjin has raised profit forecasts for 2025 and 2026 by 3% each to RMB 566 million and RMB 701 million, respectively. A profit forecast of RMB 916 million for 2027 was introduced for the first time, with valuation switched to 2026, resulting in a current stock price corresponding to P/E ratios of 37x and 28x for 2026 and 2027.