CICC: Maintaining Connett Optics (02276) Outperforms the Industry Rating Target Price of HK$58

The Zhitong Finance App learned that CICC released a research report stating that it will keep the profit forecast of Connett Optics (02276) 2025/2026 basically unchanged, and that the current stock price corresponds to 39/31 times P/E for 2025/2026. Considering the company's imminent adoption and the catalytic sentiment in the industry, the bank raised its target price by 7% to HK$58, corresponding to 47/38 times P/E in 2025/2026, with 20% upside compared to the current stock price. The company announced that it will be included in 13 indices including the Hang Seng Composite Index and the Hang Seng Hong Kong Stock Connect Index from September 8, 2025. The bank believes that the company's liquidity will increase after entering the market.

CICC's main views are as follows:

The company's recent situation

As a global leader in resin lenses, the company has deep technical, production capacity, and customer barriers. High-refractive products accelerate volume, superposition smart glasses with optical lenses, and have a clear path to high profit growth. The market still has poor expectations for the increase in the value and share of AR glasses. The bank continues to be optimistic about the long-term potential of the company's two-wheel drive, which is the cornerstone of traditional resin lenses and the second growth curve for smart glasses optical lenses.

1H25 US tariff disturbances affect revenue, 2H25 production capacity release drives revenue recovery

Standard lenses +20%, mainly due to product structure optimization, the share of independent brands increased; functional lenses were +8.8% under a high base; custom lenses were -4.9% due to a slowdown in the pace of orders placed by American customers under tariffs. China/Asia (excluding China) /Europe/America +19%/+22.5%/+6%/-1.8% due to strong local demand/the impact of American tariffs. On 2H25, a new customized production line in Japan will be put into operation in the third quarter, releasing about 20% of customized production capacity, compounding early delays in order reimbursement, and clearing the tariff gap. The bank expects revenue in the US to recover, driving up the overall growth rate.

XR verification ready, AI glasses ready to be released

According to Counterpoint's report, 1H25 global smart glasses shipments were +110% year-on-year, driven by the continued popularity of Ray-Ban Meta and the addition of new brands such as Xiaomi and RayNeo. With Luxottica's production capacity expansion, Meta's market share reached 73%; Xiaomi AI glasses are popular. New products from Meta, Samsung and many other companies will be launched in the second half of the year, and the bank believes that the industry is expected to continue to grow at a high rate. Meta is expected to release a sports model co-branded with Hypernova, third-generation Ray-Ban Meta (Aperol/Bellini), and Meta × Oakley in September. Among them, Hypernova will ship about 150,000 to 200,000 copies in the next 2 years, and the price is about 800 US dollars/pair. The company has received R&D expenses and small trial orders from leading North American customers since 2022. Technology path verification is progressing smoothly, and it is expected that the results will be realized with the volume of AR glasses.

Domestic AI glasses are being sold in unison, and sales are expected to exceed one million units in 2025

According to data from Lotu Technology, the omni-channel retail volume of 1H25 smart glasses in China was 468,000 units, +148%. Products such as Xiaomi, Thunderbird Innovation, Lenovo, and Li Weike are already on the market, and Rokid Glasses sold 300,000 units; Ali and China Telecom launched new products at the end of July, and 360, ByteDance, Samsung, Ideal, Lao Fengxiang, and KTC Kang Guan are also planning to release AI glasses. The increase in the number of brands and models has led to an expansion in the size of the market. Rotu Technology predicts that in 2025, China's omni-channel retail sales volume of smart glasses is expected to reach 1.4 million units, +216%. The company is connecting with domestic start-ups, major Internet manufacturers, and mobile phone manufacturers to lock in the next generation of intelligent core optical entrances. The positive pace of subsequent shipments is expected to drive continued growth in performance.

Risk warning: Tariffs and geographical risks, commercialization of AI glasses fell short of expectations, and industry competition intensified.