CICC has released a research report maintaining its earnings forecasts for CONANT OPTICAL (02276) for 2025/2026, with the current stock price corresponding to 39x/31x P/E for 2025/2026. Considering the company's upcoming index inclusion and industry sentiment catalysts, the firm has raised its target price by 7% to HK$58, representing 47x/38x P/E for 2025/2026 and offering 20% upside potential from the current stock price.

The company announced it will be included in 13 indices including the Hang Seng Composite Index and Hang Seng Stock Connect Index starting September 8, 2025. CICC believes the company's liquidity will improve following the index inclusion.

**Company Overview** As a global leader in resin lenses, CONANT OPTICAL has established deep moats in technology, production capacity, and customer relationships. The accelerated rollout of high refractive index products, combined with the ramp-up of smart glasses optical lenses, presents a clear path for strong profit growth. The market still underestimates the value and market share potential of AR glasses lenses. CICC continues to be optimistic about the company's long-term potential driven by traditional resin lenses as the foundation and smart glasses optical lenses as the second growth curve.

**1H25 US Tariff Impact on Revenue, 2H25 Capacity Release to Drive Recovery** Standard lenses grew 20% mainly due to product mix optimization and increased self-brand proportion. Functional lenses increased 8.8% despite a high base. Custom lenses declined 4.9% due to slower ordering pace from American customers amid tariff concerns.

Regional performance showed China/Asia (excluding China)/Europe/Americas at +19%/+22.5%/+6%/-1.8% respectively, reflecting strong domestic demand and Americas tariff impact.

For 2H25, the new custom production line in Japan will commence operations in Q3, releasing approximately 20% additional custom capacity. Combined with delayed order recovery and tariff headwinds clearing, CICC expects Americas revenue to recover, driving overall growth acceleration.

**XR Verification Ready, AI Glasses Volume Ramp Imminent** According to Counterpoint Research, global smart glasses shipments increased 110% year-over-year in 1H25, driven by continued strong sales of Ray-Ban Meta and new brand entries including Xiaomi and RayNeo. Meta achieved 73% market share through Luxottica's capacity expansion, while Xiaomi's AI glasses posted strong sales.

New products from Meta, Samsung, and multiple companies are expected to launch in the second half, and CICC believes the industry will continue its high-growth trajectory.

Meta is expected to announce the display-equipped Hypernova, third-generation Ray-Ban Meta (Aperol/Bellini), and Meta × Oakley sports collaboration in September. Hypernova is projected to ship 150,000-200,000 units over the next two years at approximately $800 per unit.

The company has been receiving R&D fees and pilot orders from leading North American customers since 2022, with technical validation progressing smoothly, positioning it well to capitalize on AR glasses volume growth.

**Domestic AI Glasses Market Explosion, 2025 Sales Expected to Exceed One Million Units** Luotu Technology data shows China's smart glasses omnichannel retail volume reached 468,000 units in 1H25, up 148%. Products from Xiaomi, Raybird Innovation, Lenovo, LEEWEI, and others are already in market, with Rokid Glasses new products achieving 300,000 unit sales.

Alibaba and China Telecom launched new products in late July, while 360, ByteDance, Samsung, Li Auto, Lao Feng Xiang, KTC, and others plan to release AI glasses. The increase in brands and models is driving market expansion.

Luotu Technology forecasts China's smart glasses omnichannel retail volume could reach nearly 1.4 million units in 2025, up 216%.

The company is engaging with domestic startups, internet giants, and smartphone manufacturers to secure its position in next-generation smart optical solutions. The improved shipment momentum ahead is expected to drive sustained earnings growth.

**Risk Factors:** Tariff and geopolitical risks, AI glasses commercialization below expectations, intensified industry competition.