Morgan Stanley upgraded CONANT OPTICAL's rating to "Overweight," citing positive prospects for XR business and urging to buy on dips

Morgan Stanley's research report indicates that CONANT OPTICAL (02276.HK) has recently seen a significant stock price correction due to the company's revenue slightly missing expectations. However, the firm remains positive about the company's XR business prospects. The company completed and put into production a new "Neo Vision XR" production line in the second half of last year, which is expected to start contributing significant revenue and profits this year. At the same time, the company continues to collaborate with about 20 smart glasses developers both domestically and internationally, with mass production expected to begin this year, marking an important milestone for the company's XR business.

On the other hand, CONANT OPTICAL is also actively investing resources to secure long-term growth, with increases in R&D spending and capital expenditures last year. Based on the long-term opportunities in the XR business and the management's confidence in long-term development, the firm has upgraded CONANT OPTICAL's rating from "in line with the market" to "overweight," maintaining a target price of 50 HKD; the recent stock price correction has made the valuation more reasonable, and the firm suggests that investors gradually accumulate shares after the price pressure.

Due to CONANT OPTICAL's revenue not meeting expectations last year, the firm has slightly lowered its revenue forecast for this year while generally maintaining its gross margin assumptions, resulting in a 2% downward adjustment in net profit forecasts, but a 2% upward adjustment in net profit forecasts for next year