According to the Zhitong Finance APP, Shenwan Hongyuan has released a research report stating that considering the rapid development of CONANT OPTICAL (02276) self-owned brands and the potential incremental growth of XR business, the firm has raised its forecast for the company's net profit attributable to shareholders for 2025-2026 to RMB 528 million / 636 million (previously RMB 500 million / 593 million), and added a forecast for 2027's net profit attributable to shareholders of RMB 762 million. The net profit attributable to shareholders for 2025-2027 is expected to grow by 23.3% / 20.4% / 19.8% year-on-year, with the current market value corresponding to PE ratios of 19.0 / 15.8 / 13.2X for 2025-2027, maintaining a &#34;Buy&#34; rating.
<h2>Shenwan Hongyuan's main points are as follows:</h2>
The company is a leading manufacturer of lenses, with a complete product SKU matrix, solid upstream and downstream partnerships, and significant supply chain advantages.
The company announced that its performance for the 2024 annual report met expectations, achieving revenue of RMB 2.061 billion, a year-on-year increase of 17.1%, and a net profit attributable to shareholders of RMB 428 million, a year-on-year increase of 31.0%. In 2024H2, it achieved revenue of RMB 1.084 billion, a year-on-year increase of 16.8%, and a net profit attributable to shareholders of RMB 220 million, a year-on-year increase of 30.3%. The company distributed a total dividend of RMB 0.28 per share for the year, corresponding to a dividend payout ratio of 30%. In recent years, the company has actively focused on the domestic market and self-owned brands, creating new growth momentum, with an increasing proportion of differentiated products, driving continuous improvement in profitability. The smart glasses market is booming, and the company is actively positioning itself with first-mover advantages. GoerTek's continuous subscription and acquisition of the company's equity demonstrate recognition within the industry chain, while also empowering the company's related business development and opening up future growth space.
Global diversified development, rapid growth of functional lenses driving product structure upgrades and profitability optimization.
1) Revenue side: By region: In 2024, mainland China, the Americas, Asia (excluding mainland China), Europe, Oceania, and Africa achieved revenues of RMB 655 million / 474 million / 522 million / 319 million / 65 million / 24 million, with year-on-year growth rates of +13.9% / +16.9% / +37.9% / +6.4% / -13.8% / +0.8%, respectively. The Chinese region continues to experience rapid growth, with a slight deceleration in 2024H2 mainly due to a high base in 2023H2. Additionally, the company is actively exploring regions such as South America, India, and Mexico, driving rapid growth in these areas. By product category: In 2024, functional lenses, standard lenses, and customized lenses achieved revenues of RMB 755 million / 907 million / 395 million, with year-on-year growth rates of +32.4% / +8.8% / +11.8%, respectively. The high-margin functional lenses and customized lenses are leading in growth, driving continuous upgrades in product structure.
2) Profitability side: In 2024, the company's gross margin was 38.6%, an increase of 1.2 percentage points year-on-year, mainly due to the continuous efforts in self-owned brands and the domestic market, as well as the increase in the proportion of high-margin products. In 2024, the company's sales and distribution expense ratio / administrative expense ratio / financial expense ratio were 6.3% / 9.4% / 0.5%, with year-on-year changes of +0.4 / -0.5 / -0.3 percentage points, respectively. The company continues to focus on the domestic market and self-owned brands, leading to an increase in the sales and distribution expense ratio, but thanks to the company's lean management and optimization of the balance sheet, both the administrative expense ratio and financial expense ratio have decreased
XR business positioning advantage is obvious, GoerTek's equity investment synergy effect is expected to be released
The company's annual report mentions that it continues to cooperate with several globally leading technology and consumer electronics companies while actively expanding other domestic and international technology and consumer electronics clients. Previously, GoerTek has continuously subscribed to and acquired equity in the company. GoerTek mainly provides vertical integrated product solutions composed of precision parts and smart hardware, along with R&amp;D and manufacturing services, serving leading clients in the global technology and consumer electronics industry. Currently, GoerTek's equity stake in the company has increased to 20%, which not only demonstrates recognition within the industry chain but also helps enhance the strategic partnership between the company and GoerTek, bringing more business development opportunities and collaboration chances with GoerTek. Currently, smart glasses are in a period of rapid development, with the second-generation Ray-Ban Meta explosive product igniting the market. Domestic and international consumer electronics companies, major internet firms, and AR specialists are competing to layout, and the market is expected to expand rapidly, giving the company a significant positioning advantage.
The company adjusts its equity incentive plan, demonstrating confidence in long-term growth
The company announced adjustments to its 2023 equity incentive plan, with the grant price (4.58 yuan/share), recipients (7 executives and 147 employees), and quantity (a total of 11.87 million shares) remaining unchanged; the assessment period has been extended from 3 years to 4 years, with 20%, 20%, 30%, and 30% unlocking in 2025-2028, respectively. The corresponding assessment targets for the net profit attributable to the parent company, excluding equity incentive expenses, are not less than 21%, 17%, 15%, and 12% year-on-year, respectively (the previous assessment period was 2025-2027, unlocking 33%, 33%, and 34% respectively). This round of incentives is the first since the company went public, fully covering executives and core employees, achieving deep binding of interests among all parties. The company's choice to extend the equity incentive period demonstrates its ample confidence in future steady growth. In addition, on December 20, 2024, the company announced a new round of equity incentive plan for 2025, intending to grant no more than 3% of the company's shares, which is expected to further bind employee interests.
The company's manufacturing capabilities are outstanding, gradually focusing on independent brands and the domestic market, with the lens main business expected to maintain steady growth
1) Products: Outstanding R&amp;D capabilities, continuous optimization and upgrading of product structure. The company closely collaborates with upstream raw material suppliers such as Mitsui, possesses in-house mold production capabilities, and has over 7 million SKUs to meet differentiated customer needs; it emphasizes product R&amp;D, with TAG Heuer remaining the largest customer, and high-end products being recognized by the market, driving continuous iteration and upgrading of the product structure;
2) Channels: Diversified channel layout, accelerating efforts in the domestic market and independent brand building. The company initially focused on overseas OEM business, but in recent years, it has rapidly expanded in the domestic market, promoting brand marketing through both online and offline channels. In 2024, the independent brand business is expected to achieve revenue of 1.15 billion yuan, a year-on-year increase of 24.5%, accounting for 55.8% of total revenue, an increase of 3.3 percentage points year-on-year;
3) Supply Chain: Significant manufacturing advantages, with a global capacity layout ensuring growth. Based on a strong supply chain, the company creates customized production capabilities to achieve a win-win for the company, small B clients, and consumers; lean management enhances operational efficiency, with labor and asset turnover efficiency leading the industry;
The layout of the three major bases ensures production, and the subsequent commissioning of the Thailand factory fully addresses potential trade risks, helping the company expand into international markets.
Risk Warning: Risks related to the stability of raw material supply, risks of XR business expansion falling short of expectations, risks of high-end product sales not meeting expectations

02276

Shenwan Hongyuan maintains a "Buy" rating on CONANT OPTICAL, expecting the net profit attributable to the parent company to grow by 23.3%, 20.4%, and 19.8% in 2025-2027, respectively. The company has a significant positioning advantage in the smart glasses market, with revenue expected to reach 2.061 billion yuan in 2024, a year-on-year increase of 17.1%. The company is actively laying out its domestic market and independent brands, promoting profitability improvement, and has broad growth potential in the future

Shenwan Hongyuan: Maintains CONANT OPTICAL "Buy" Rating, Lens Main Business Expected to Maintain Steady Growth