Morgan Stanley Bets on Optical Component Stocks in Greater China Tech Sector

Morgan Stanley has spotlighted optical component manufacturers as the most promising investment opportunities in the Greater China technology hardware sector. The global investment bank believes these companies are well-positioned to benefit from rising demand for premium smartphones and the rapid adoption of next-generation optical technologies.

Leading the list is Taiwan-based Largan Precision (3008.TW), which Morgan Stanley identified as its top stock pick using a residual income valuation model. The firm applied an 8.5% cost of equity and forecast a 7% compound annual growth rate in net profit between 2026 and 2036, along with a 3% terminal growth rate. Analysts expect the company to gain from stronger demand for high-end smartphones, as well as faster adoption of advanced technologies such as 1G6P lenses and periscope camera systems.

Morgan Stanley also noted that Largan Precision could face risks from increasing market competition, which may pressure selling prices and reduce profit margins. Slower demand for premium smartphone devices could also impact growth expectations.

Genius Electronic Optical Co. Ltd. (3406.TW) ranked second in Morgan Stanley’s Greater China technology hardware analysis. The company’s valuation is also based on a residual income model with an 8.5% cost of equity, using a 3% risk-free rate, 1.0 beta, and a 5.5% equity risk premium. Morgan Stanley projects a medium-term net profit CAGR of 4% and a terminal growth rate of 3%.

According to the investment bank, Genius Electronic Optical could benefit from increased market share in Apple iPhone components and stronger-than-expected demand for Apple mixed reality products. Growth in virtual reality and mixed reality device shipments may also provide additional upside.

However, risks remain, including possible delays in Apple’s mixed reality product launches and potential losses in iPhone component market share.