CONANT OPTICAL (02276) has demonstrated strong performance in the eyewear manufacturing industry, with balanced growth in domestic and international sales. Structural upgrades are expected to drive sustained improvements in profitability. The company has partnered with leading 3C manufacturers to develop smart glasses, indicating promising growth prospects.

Given the accelerated development of the smart glasses supply chain and the company's steady product structure optimization, Huachuang Securities forecasts net profits attributable to shareholders of RMB 560 million, RMB 700 million, and RMB 870 million for 2025-2027, with corresponding P/E ratios of 41x, 33x, and 27x. Based on comparable company valuations, the bank assigns a 2026 P/E of 40x, raising the target price to HK$63.63 while maintaining a "Strong Buy" rating.

Key highlights include: - Strong demand for Quark AI glasses has exceeded expectations, with delivery lead times extended to 45 days on platforms like Tmall, Douyin, and JD.com. Additional production lines have been added to meet holiday season demand. - CONANT OPTICAL is the exclusive lens supplier for Quark AI glasses, with premium pricing for high-index lenses (e.g., 1.60/1.67/1.74 refractive index lenses priced RMB 719/899/1,529 higher than standard lenses). - The company holds a first-mover advantage in the XR sector with high technical barriers, positioning it well for future supply chain advancements.

Core business remains stable, with North American operations recovering. The upcoming Japanese factory, set for completion in Q4, will add 600,000 customized lens units, potentially reducing U.S. tariffs. Further expansion in Thailand will enhance global supply capabilities, supporting steady growth in the core business.

Risks include slower-than-expected smart glasses adoption, domestic channel expansion challenges, and intensifying industry competition.