We visited AAC’s mgmt. in Shenzhen recently, and overall we are positive onAAC’s business outlook and revenue growth in 2025 (+10-15% YoY on ourestimate), driven by: 1) optics (+20% YoY): spec upgrade in plastic lens (6P/7P)and HCM (OIS/ telescope), as well as WLG flagship order wins in 2H25E; 2)Precision mechanics (+20% YoY): VC adoption in AI phone and hinge orderwins across overseas/Chinese clients; 3) Electromagnetic drive (+15-20% YoY):haptics upgrade and robotics order wins; 4) automotive acoustics (mid-singledigit YoY): share gains in overseas OEMs and Chinese EV brands (Li, Xiaomi,Geely, etc), and expanding product portfolio (speaker, microphone, algorithm).
　　In addition, we expect acoustics upgrade (master-level SLS/Combo) and optics’improving mix (6P+/WLG) will drive margin expansion into 2025/26E. MaintainBUY and SOTP-based target price of HK$58.78.
　　Strong 2025 outlook across multiple segments. Mgmt. maintainedrevenue guidance of 10-15% YoY growth in 2025. For smartphone, mgmt.
　　highlighted AAC’s leading market position in 1) major US client: major sharein acoustics (speakers/MEMs), haptics and VC components, and 2) Androidclients: major share in flagship models for mid-frame casing, master-levelSLS, x-axis haptics and WLG lens projects. In particular, key growth driversin 2025 will come from 1) optics upgrade to high-end spec (7P/WLG lens,OIS/telescope HCM), 2) VC adoption by high-end models of the major USclient, 3) automotive acoustics’ client base expansion and order wins, 4)MEMs microphone upgrade for AI smartphones.
　　Emerging drivers from robotics, AI glasses and automotives. AAC hasexpanded into new strategic markets with a solid product roadmap. Forrobotics, AAC has an established product portfolio in robot actuators, andalready started mass production and shipment to several top-tier roboticscustomers. For AI glasses, AAC is the sole supplier of specific speakers forseveral major Chinese brands. For automotives, AAC recently announcedplans to acquire a 53.7% stake of a Chinese automotive microphone modulecompany, Hebei Chuguang Auto Parts, for RMB288mn (2024 revenue ofRMB252mn), which will further strengthen its automotive product offerings.
　　Valuation/Key risks. We believe AAC is well-positioned to capture multipletrends in AI smartphones (optics/VC/MEMs), foldable phones (hinges/casing), automotive acoustics (speakers/MEMs) and robotics (actuators/EM). Trading at 15.8x/13.3x FY25/26E P/E, the stock is attractive in ourview, vs 39%/18% EPS growth in FY25/26E. Reiterate BUY.