HSBC has indicated in a recent research report that AAC TECH (02018) has entered a new phase of structural growth, propelled by increasing demand for AI devices, optical upgrades, and thermal management solutions. The company's 2025 performance exceeded expectations, and its 2026 guidance remains solid, reflecting the continued strengthening of its multi-business line advantages. The report shows that AAC TECH's net profit for 2025 increased by 40% year-over-year to RMB 2.5 billion, slightly surpassing market forecasts, primarily driven by expansion in its MEMS, thermal management, and optical businesses. Notably, revenue from the thermal management business grew by over 400%, and shipments of hybrid lenses surpassed the ten-million mark, demonstrating the company's competitive strength in the AI smartphone and high-end optics segments. Looking ahead to 2026, management has guided for revenue growth to be no less than that of 2025, with gross margin expected to improve further from the base of 22.1%. HSBC believes AAC TECH's diversified growth trajectories are now clearly defined: The thermal management business, focusing on vapor chambers, will continue to benefit from rising AI computing power demands, with its applications expanding from smartphones to tablets, wearables, and even data center cooling. The optical business is seeing sustained gross margin improvement, supported by rising average selling prices for higher-end lenses and a recovery in module profitability. Automotive acoustics, with projects such as Zeekr now in production, is emerging as a long-term, high-margin growth engine. The acquisition of a leading domestic server liquid cooling specialist significantly strengthens its data center thermal management portfolio and is projected to contribute approximately RMB 200 million in revenue by 2026. HSBC notes that AAC TECH possesses deep technological expertise across key AI hardware components, including acoustics, optics, precision mechanical parts, and thermal solutions. Combined with its high-quality customer base, this provides a solid foundation for the company's performance to navigate beyond the smartphone cycle. Given an expected compound annual growth rate of 18% for net profit from 2025 to 2028, and the long-term potential unlocked by its diversified business lines, HSBC maintains a "Buy" rating on AAC TECH with a target price of HK$53.9, indicating significant upside from the current share price. HSBC emphasizes that AAC TECH is at a critical juncture in its transition from a smartphone component supplier to a key hardware platform provider for AI devices, with simultaneous growth across its multiple business lines set to be a definitive source of expansion over the next three years.