Q1 performance met expectations; growth trajectory from Apple to storage and AI optics; upgrade target price; reiterate buy.

1Q in line; growth trajectory from Apple tomemory& AI optics; lift PO; reiterate Buy Reiterate Rating:BUY| PO:37.00 CNY| Price:33.07 CNY 1Qearnings in line with BofAe; strong gross margin 23 April 2026 Crystal-Optech’s 1Q earnings came in at CNY247mn (+30% QoQ, +12% YoY), largely inline with BofAe but 7% behind consensus. Revenue of CNY1.7bn (-5% QoQ, +16% YoY)was 8% ahead of BofAe but 7% below consensus. The YoY revenue expansion amidweakening Android smartphone demand was supported by high Apple exposure as wellas new product ramp-up (IRCF). Gross margin expanded by 1.5ppt YoY to 29.5%, Equity (CNY)PreviousCurrentPrice Obj.32.0037.002027E EPS1.291.322028E EPS1.501.612026E EBITDA (m)2,259.42,162.32027E EBITDA (m)2,810.52,658.72028E EBITDA (m)3,227.33,217.2 Multi-year Apple projects; AI-related a potential upside As indicated in 4Q25 results review, Crystal will benefit fromiPhone camera specupgrade this year (seereport), and its visibility at Apple is extending into 2029, whichshould continue to support Crystal’s legacy business. More importantly, we like Crystal’spotential entry into AI server-related areas (optics, HDD, etc). We note that severalsmartphone optic suppliers aim to enter the AI server industry, and we believe Crystalstands out in its leading capacity of optical coating, semiconductor optic know-how and Katherine Zhu>>Research AnalystMerrill Lynch (Hong Kong)kexin.zhu@bofa.com Robert Cheng>>Research AnalystMerrill Lynch (Taiwan)robert.cheng@bofa.com Lift PO to CNY37; reiterate Buy Doris Kao>>Research AnalystMerrill Lynch (Taiwan)doris.kao@bofa.com We notethat 1Q results proved that new products’contribution looks better thanexpected, easing our previous concern about Android brands’weaker pull-in. We fine-tune 2026E earnings and lift 2027-28E by 2-7% to reflect potential upside from newbusinesses. We raise our PO to CNY37 (32x 2H26-1H27E P/E) from CNY32 (30x 2026EP/E), following valuation base rollover and a higher multiple. Our new P/E of 32x (close Cindy Lo>>Research AnalystMerrill Lynch (Taiwan)cindy.lo3@bofa.com This research report provides general information only. No part of this report may be usedor reproduced or quoted in any manner whatsoever in Taiwan by the press or otherpersons without the express writtenconsent of BofA Securities. >> Employed by a non-US affiliate of BofAS and is not registered/qualified as a research analystunder the FINRA rules. Refer to "Other Important Disclosures" for information on certain BofA Securities entities that takeresponsibility for the information herein in particular jurisdictions. AcronymIRCF:infrared cut-off filterAI:aritificial intelligenceHDD:hard drive disk BofA Securities does and seeks to do business with issuers covered in its researchreports. As a result, investors should be aware that the firm may have a conflict ofinterest that could affect the objectivity of this report. Investors should consider thisreport as only a single factor in making their investment decision. iQprofileSMCrystal-Optech (A) Company SectorIT Hardware CompanyDescription Crystal Optech, founded in 2002, is a key upstream opticsupplier focusing on IRCF, optic cover glass, prism andbiometric sensing components. Apple is its largestsmartphone customer, followed by Android brands andmodule makers. Crystal alsosupplies waveguide lenses forAR glasses. The company entered the auto market in 2021 Investment Rationale We have a Buy rating on Crystal Optech, on(1) multi-yearcontent value/share gain at iPhone cameras, and (2) rapidexpansion in auto with delivery in HUD and LiDAR cover. ARand AI server related optics may bring more upside in Stock Data Price to Book Value Price objective basis & risk Crystal-Optech (XMKAF) We set our PO at CNY37, on 32x 2H26-1H27E P/E. 32x is close to +1SD of Crystal'shistorical trading average of 27x. We view 32x as supported by Crystal's solid earningsexpansion of 24% CAGR in 2025-28E, as well as its strong position in Apple/AR glasses Downside risks: (1) slower-than-expected penetration at periscope and 3D sensing lens,(2) worse-than-expected demand at consumer electronics, (3) slower-than-expected Upside risks: (1) faster-than-expected penetration at periscope and 3D sensing lens, (2)better-than-expected demand at consumer electronics, (3) faster-than-expected Analyst Certification I, Katherine Zhu, hereby certify that the views expressed in this research reportaccurately reflect my personal views about the subject securities and issuers. I alsocertify that no part of my compensation was, is, or will be, directly or indirectly, related Special Disclosures Information on securities which are listed on the exchanges where ML Securities(Taiwan) Limited is not permitted to trade or solicit trades for clients is forinformational purposes only and is not a recommendation or a solicitation to tradesuch securities. ML Securities (Taiwan) Limited will not execute transactions for noraccept orders from clients t