Core Viewpoint - Cathay Securities has initiated coverage on Botai Carlink (02889) with a "Buy" rating and a target price of HKD 280.20, highlighting the company's growth potential driven by the acceleration of automotive intelligence and the expansion of smart cockpit as a core interaction entry point [1] Group 1: Market Position and Growth - The penetration rate of smart cockpit domain controllers in China reached 41.1% in August 2025, a year-on-year increase of 12%, indicating a critical transition from optional to standard features [1] - Botai Carlink has become the second-largest supplier of pre-installed cockpit domain controllers in the Chinese market for new energy passenger vehicles, holding a 10.87% market share from January to September 2025 [1] - Major clients include Huawei, Li Auto, Xpeng, Avita, Lantu, and Seres, with revenue from core clients Huawei and Li Auto expected to account for approximately 50% of total revenue in 2024 [1] Group 2: Product Pricing and International Expansion - The average selling price of domain controllers has increased from RMB 990 in 2023 to RMB 2,141 in 2024, further rising to RMB 2,257 in the first five months of 2025, supporting the company's profitability improvement [2] - A strategic partnership with Porsche was established in September 2025 to develop next-generation in-car entertainment systems for the Chinese market, marking Botai's entry into the global luxury car supply chain [2] - The company has also entered the supply chains of international brands such as Hyundai and Kia, supporting Chinese brands' international expansion through a dual-track model of "serving global automakers + supporting Chinese brands abroad" [2] Group 3: Financial Performance and Projections - The company's gross margin fluctuated between 14.1% and 11.8% from 2022 to 2024 due to chip costs and R&D investments, but is expected to improve with business scale expansion [3] - Gross margin is projected to gradually recover from 12.9% in 2025 to 13.8% in 2027, while R&D expenses are expected to stabilize between RMB 1.9 billion and RMB 2.4 billion annually over the next three years [3] - Revenue is anticipated to grow at a compound annual growth rate of 40.5% from 2024 to 2027, with smart cockpit solutions being the primary contributor, leading to a forecasted net profit of approximately RMB 45 million in 2026 and RMB 175 million in 2027 [3] Group 4: Valuation - Cathay Securities has set a valuation multiple of 7.0x for Botai Carlink for the fiscal year 2026, reflecting a premium compared to peers, based on the company's advantages in customer structure, technological accumulation, and global cooperation [4] - The acceleration of industry consolidation in the smart cockpit sector and the gradual realization of partnerships with high-end brands like Porsche are expected to enhance the company's growth certainty [4]