Guosen Securities has initiated coverage on CONANT OPTICAL (02276) with an "Outperform" rating, citing growth in traditional business and incremental contributions from its XR segment. The firm forecasts net profits attributable to shareholders of RMB 540 million, RMB 660 million, and RMB 830 million for 2025-2027, representing growth rates of 25.6%, 22.1%, and 26.9%, respectively. EPS is projected at RMB 1.12, RMB 1.37, and RMB 1.74. Based on multiple valuation approaches, the fair value range is estimated at RMB 56.22-61.84 (HK$61.78-67.96).

Key highlights from Guosen Securities' report:

**Core Business & Expansion into XR Glasses** CONANT OPTICAL is a leading global provider of optical lenses, serving downstream brands (ODM model) and end-users (proprietary brands) with standardized and customized solutions. From 2021-2024, revenue grew at a CAGR of 15%, while profits expanded at a 33% CAGR. The company has also entered the smart glasses market, with revenue recognition achieved in 2025.

**Lens Industry Outlook** *Traditional Lenses*: The global lens retail market is expected to reach $54.3 billion in 2024 (factory sales: ~$6.2 billion), with 2019-2024 CAGRs of 4.7% globally and 5.0% domestically. Annual lens shipments are estimated at 940 million pairs in China and 1.7 billion pairs worldwide. Despite fragmentation, players like EssilorLuxottica have thrived through differentiated products, acquisitions, and brand-building, achieving nearly $30 billion in annual revenue.

*AI/XR Lenses*: Global AI glasses shipments reached 2.83 million pairs in 2024, with a penetration rate of just 0.2%. Drawing parallels with TWS earbuds and robotic vacuums, if AI glasses achieve 10% penetration in five years, shipments could hit ~160 million pairs. The competitive landscape includes tech giants (e.g., Meta, Alibaba), consumer electronics firms (e.g., Xiaomi), and supply chain players. AR-compatible AI glasses demand thinner, higher-performance lenses tailored to specific display solutions, creating higher technical and customer barriers.

**CONANT’s Competitive Edge** Ranked second globally in resin lens shipments and fifth in sales, CONANT is one of the few manufacturers capable of mass-producing 1.74 high-index lenses while offering flexible small-batch services. By increasing its premium product mix and proprietary brand share, the company has driven structural revenue and profit growth. It is also a pioneer in XR lenses, collaborating with leading domestic and international firms. For instance, it exclusively supplies lenses for Alibaba’s Quark AI glasses launched in October 2025. With technological and cost advantages, CONANT is well-positioned to capture significant market share as AI glasses gain traction.