A wave of smart-glasses launches is providing near-term industry catalysts. Overseas, Meta has unveiled one VR device and two new AI-glasses models and expanded the sales regions for its display-equipped product. In China, leading players including RayNeo and Rokid have also introduced new products. Faster product iteration by major technology companies could drive rapid industry growth, benefiting the company as a precision-optics powerhouse and supply-chain partner. Looking ahead, we expect: 1) growth in the traditional lens business to improve markedly in 2H26 from 1H26 as raw-material supply for 1.74 high-index lenses returns to normal; and 2) XR volumes to scale up significantly in 2027, supported by a substantial pipeline of development programs and customers’ new product launches. We think that a commercial XR volume ramp could create a second growth engine and support the company’s transition into a visual-technology solutions provider. Maintain BUY.
Extensive development pipeline points to an XR ramp in 2027
According to company announcements, the company has undertaken more than 40 R&D programs with approximately 20 leading domestic and international companies over the past three years. Some programs have entered or are approaching mass production. This year: 1) in April, the company announced a memorandum of understanding with a leading overseas smart-glasses company, which selected it as the core-lens supplier for a key product; we think that sales of the product could begin in 2027; 2) in July, it announced framework agreements with four leading domestic and international technology companies; and 3) in its August interim report, it said that a major program with one international customer was in the final stage of preparation for mass production, while programs with two other leading international customers had entered small-batch trial production. XR revenue reached approximately RMB50.5mn in 1H26, up by around 15-fold YoY. As customers launch new products, we expect a significant XR volume ramp-up in 2027, with substantial upside potential for revenue and earnings.
Earnings forecasts and valuation
We maintain our forecasts for attributable NP of RMB714mn, RMB901mn, and RMB1,113mn for 2026, 2027, and 2028, respectively, with EPS of RMB1.41, RMB1.78, and RMB2.20. Comparable companies trade at 30x 2026E PE on Wind and Bloomberg consensus. Given the company’s strength in traditional lenses, the close fit between its core capabilities and the smart-glasses industry, and favorable long-term demand for high-index and XR lenses, we apply 40x 2026E PE to derive our target price of HKD65.42. This assumes an RMB/HKD exchange rate of 1:1.16; our previous target price was HKD67.00, based on 42x 2026E PE and EPS of RMB1.41. Maintain BUY.
Risks: weaker lens demand than we expect, intensifying industry competition, raw-material price fluctuations, slower smart-glasses adoption than we expect, geopolitical risks.