Core Viewpoint - CICC initiates coverage on Conant Optical (02276) with an "outperform" rating and a target price of HKD 54.00, based on a P/E valuation method corresponding to a 35x P/E for 2026, with expected EPS of 1.14 and 1.42 for 2025 and 2026 respectively, indicating a CAGR of 26% from 2024 to 2026 [1] Industry Overview - Traditional lens market is expected to grow steadily, with Frost & Sullivan projecting global lens sales to reach approximately USD 8.2 billion by 2029, with a CAGR of 5.8% from 2024 to 2029. China is the largest lens producer globally, accounting for 26% of global exports in 2024, with the company being the second-largest in resin lens sales [2] - The AI glasses market is experiencing rapid expansion, with Wellsenn forecasting global sales to exceed 10 million units for the first time in 2026, and Frost & Sullivan predicting sales to surpass RMB 100 billion by 2029. Major tech companies are launching products and investing in R&D, establishing a clear first-mover advantage [2] Company Strengths - Strong partnership with Mitsui Chemicals ensures stable customer collaboration, with the company being the longest domestic partner of Mitsui and having the most comprehensive product range. The availability of raw materials is relatively stable, and the company employs a C2M model with flexible production lines allowing for 2-3 day delivery, enhancing inventory turnover and response speed compared to traditional distribution [3] - The company is steadily building its own brand, with revenue contribution increasing year by year and gross margins higher than ODM business, improving overall profitability. The company has developed integrated bonding technology for smart glasses, collaborating with leading North American clients and receiving R&D and small trial orders, positioning itself to benefit from industry growth [4] - The company continues to expand its product line for functional and customized lenses, with such revenue accounting for over half of total revenue in 2024, maintaining double-digit growth. The youth defocus lens market is becoming increasingly concentrated, and the company is launching multiple new specifications while expanding its grassroots hospital cooperation network, with market share expected to gradually increase [4] Market Perception - The firm believes the market underestimates the company's technological barriers in the resin lens sector and anticipates that the company's market share and product rollout pace in the smart glasses sector will exceed expectations. Potential catalysts include the expansion of its own brand and the ramp-up of AI glasses [5]

Investment Highlights - Company is a leading global manufacturer of resin lenses with strong R&D capabilities and stable customer base, expected to achieve continuous growth through customized lenses, proprietary brands, and smart glasses development [1][2] - Traditional lens market is projected to grow steadily, with global lens sales expected to reach approximately $8.2 billion by 2029, and a CAGR of 5.8% from 2024 to 2029 [1] - AI glasses market penetration is increasing, with global sales expected to exceed 10 million units by 2026, and sales projected to surpass 100 billion yuan by 2029 [1] Strategic Partnerships - Deeply integrated with Mitsui Chemicals, ensuring stable customer cooperation and raw material availability [2] - Company is the longest-standing domestic partner of Mitsui, with the most comprehensive product range [2] - Utilizes a C2M model with flexible production lines capable of 2-3 day delivery, improving inventory turnover and response speed compared to traditional distribution [2] Client Relationships - Long-term partnerships with global leaders such as Luxottica and Essilor, resulting in high order stickiness [2] - Accelerating penetration of proprietary brands in the domestic market, which has become a major source of revenue growth [2] Product Development - Steady growth in proprietary brand revenue, with higher gross margins compared to ODM business, enhancing overall profitability [2] - Early investment in smart glasses technology with integrated bonding technology, collaborating with North American clients for R&D and small-scale orders [2] - Continuous expansion of functional and customized lens product lines, with revenue from these products expected to exceed 50% of total revenue by 2024, maintaining double-digit growth [2] Market Positioning - Company is believed to be underestimated in its technological barriers in the resin lens sector, with potential for exceeding market expectations in smart glasses market share and product rollout pace [2][3] Financial Projections - Expected EPS for 2025 and 2026 are 1.14 yuan and 1.42 yuan respectively, with a CAGR of 26% from 2024 to 2026 [3] - Current stock price corresponds to 36x and 29x P/E for 2025 and 2026, respectively, with a target price of 54.00 HKD, indicating a 21% upside potential [3]