According to Zhitong Finance APP, CICC released a research report maintaining AAC TECH's (02018) net profit attributable to shareholders at 2.456 billion yuan and 2.866 billion yuan for 2025/2026 respectively. The current stock price corresponds to 25/26 P/E ratios of 20.3x/17.1x. The firm maintains its Outperform rating and HK$61.0 target price, corresponding to 25/26 P/E ratios of 27.3x/23.0x, representing a 34.5% upside from the current stock price.

CICC's main viewpoints are as follows:

**1H25 Earnings Meet Firm and Market Expectations**

AAC TECH released its 2025 interim report: 1H25 revenue increased 18% year-over-year to 13.318 billion yuan, with net profit attributable to shareholders rising 63% year-over-year to 876 million yuan, meeting both the firm's and market expectations. The firm believes the significant profit growth was mainly driven by: 1) Continued improvement in optics business profitability: benefiting from the company's premium strategy and lean operations, 1H25 optics revenue grew 20% year-over-year to 2.65 billion yuan, with gross margin improving 5.5ppt year-over-year to 10.2%; 2) Rapid growth in electromagnetic drives and precision structural components: 1H25 revenue increased 27% year-over-year to 4.63 billion yuan while maintaining stable gross margins; 3) Other net income increased by 272 million yuan year-over-year, mainly due to fair value changes in contingent consideration payable related to PSS.

**Premium Products Continue Volume Growth, Optics Business Sees Both Revenue and Profitability Gains**

Against the backdrop of specification upgrades in the smartphone optics industry and the company's premium strategy advancement, the company's 1H25 optics business revenue grew 20% year-over-year to 2.65 billion yuan, with gross margin reaching 10.2%, improving sequentially for four consecutive quarters. Specifically: 1) For plastic lenses, 6P and above shipment ratio exceeded 18%, with stable 7P shipments, driving plastic lens gross margin improvement of over 10ppt year-over-year; 2) For optical modules, shipments above 32MP increased 3ppt year-over-year to 34%, OIS sales grew nearly 150% year-over-year, driving steady ASP improvements for modules; 3) For WLG, the company achieved project breakthroughs in 1G6P main cameras and prisms for Android flagship models in the first half.

Looking ahead to 2H25, as the company continues gaining market share in the mid-to-high-end market and optimizing product mix, the firm expects plastic lens and optical module revenue/profit to maintain growth, and recommends attention to profitability improvements from WLG project volume ramp-up.

**AI Empowers Edge Hardware Upgrades, Optimistic on Motor/Acoustic/Thermal Management Product Growth**

For motors, the company collaborated with overseas customers to advance innovative side button applications, continuing volume ramp-up in the first half, driving electromagnetic drives and precision structural components revenue up 27% year-over-year to 4.63 billion yuan. For acoustics, AI voice interaction places higher performance requirements on MEMS microphones. In the first half, the company's high signal-to-noise ratio microphones shipped in large volumes to overseas customers, driving sensor and semiconductor revenue up 56% year-over-year to 610 million yuan. The firm expects this product to continue contributing to performance in the second half, while speaker products are also expected to benefit from ultra-thin trends. For thermal management, the firm is optimistic about the company's leading advantages in VC cooling technology, expecting rapid volume ramp-up in customer flagship models in the second half, and recommends attention to opportunities for subsequent model penetration/solution upgrades.

**Multi-Directional Layout in Automotive, Robotics, and XR Opens Long-Term Growth Space**

AAC TECH possesses deep technical reserves in acoustic systems, optical systems, and precision processing components. The firm is optimistic about AAC TECH's ability to leverage its lean manufacturing and design capabilities from smartphones to emerging fields, creating diversified business growth engines.