Key Takeaways:
Morgan Stanley upgraded Connaught Optics (02276) to ‘Overweight’ on April 10, citing a strong outlook for its extended reality (XR) business after a recent share price decline made its valuation more attractive.
The bank’s analysts said they recommend investors "buy on dips" following the stock's recent pressure. The price target is maintained at 50 HKD.
The upgrade is based on the company's new "Neo Vision XR" production line, which began operations in the second half of last year. Morgan Stanley believes it will start contributing significantly to revenue and profit in 2026. Connaught is also collaborating with approximately 20 domestic and international smart glasses developers, with mass production expected to begin this year.
While Morgan Stanley lowered its 2026 net profit forecast for Connaught by 2 percent due to a prior-year revenue miss, it raised its 2027 forecast by 2 percent, reflecting confidence in long-term growth driven by the XR business.
The rating change from a major investment bank could increase investor focus on the lens manufacturer's stock. The key catalyst for investors will be the initial sales and margin data from the "Neo Vision XR" line, which will validate the company's heavy investment in the high-growth sector.
This article is for informational purposes only and does not constitute investment advice.
