Core Viewpoint - Horizon Robotics reported strong performance for the first half of 2025, with revenue increasing by 68% year-on-year to 1.57 billion RMB, primarily driven by a significant growth of 250% in automotive product solutions [1] Group 1: Financial Performance - The company's revenue for automotive product solutions reached 778 million RMB, reflecting a substantial year-on-year increase of 250% [2] - Despite a 13.7 percentage point decline in gross margin due to changes in product mix, the overall gross margin remained high at 65.4% [1] - The net loss for the first half of the year slightly widened to 5.2 billion RMB, compared to 5.1 billion RMB in the same period last year [1] Group 2: Market Position and Growth Drivers - Horizon Robotics holds a market share of 45.8% in basic assisted driving solutions and 32.4% in overall assisted driving solutions, reinforcing its leadership in the Chinese automotive technology market [1] - The company expects its product solutions revenue to reach 2.1 billion RMB this year, with a projected revenue split of 60% from product solutions and 40% from licensing/services [2] - The penetration rate of the NOA function in the Chinese market increased from 20% in 2024 to 32% in the first half of 2025, contributing to the growth in high-end product sales [2] Group 3: Profitability and Margin Outlook - The gross margin for the product solutions business improved by 3.9 percentage points to 45.6%, despite a decline in overall gross margin [3] - The company anticipates a long-term gross margin stabilization above 50%, with projected overall gross margins of 63.8% and 58.1% for 2025 and 2026, respectively [3] - The gross margin for the licensing/services business decreased by 3.2 percentage points to 89.7% due to rising labor costs [3]

Investment Rating - The report maintains a "Buy" rating for the company, with a target price raised to HKD 12.3, reflecting a potential upside of 28.1% from the current price of HKD 9.60 [1][3][7]. Core Insights - The company reported a strong revenue growth of 68% year-on-year, reaching RMB 1.57 billion in the first half of 2025, primarily driven by a significant increase in automotive product solutions, which grew by 250% [1][7]. - Despite a decline in gross margin by 13.7 percentage points due to changes in product mix, the overall gross margin remains high at 65.4% [1][7]. - The company continues to invest heavily in R&D, leading to a slight increase in net loss to RMB 5.2 billion in the first half of the year [1][7]. - The management emphasizes the competitive advantage in the accelerating adoption of assisted driving technologies in China [1][7]. Financial Overview - Revenue projections show a steady increase from RMB 1.55 billion in FY23A to RMB 8.73 billion in FY27E, with year-on-year growth rates of 71.3% in FY23A and 53.6% in FY24A [2][11]. - Gross margin is expected to stabilize above 50% in the long term, with specific forecasts of 63.8% for FY25E and 58.1% for FY26E [2][11]. - The net profit is projected to remain negative in the coming years, with estimates of RMB -6.93 billion in FY25E and RMB -1.96 billion in FY26E [2][11]. Market Position - The company holds a market share of 45.8% in basic assisted driving solutions and 32.4% in overall assisted driving solutions, reinforcing its leadership in the Chinese automotive technology market [1][7]. - The product solutions segment is anticipated to be the core growth engine, with revenue expected to reach RMB 2.1 billion this year, driven by a shift towards higher-value products [7]. Shareholder Structure - Major shareholders include SAIC QIJUN I HLDG LTD with 9.3% and GIL TRUST LIMITED with 8.1% [4]. Stock Performance - The stock has shown strong performance with a 31.3% absolute return over the past month and a 26.8% return over the past three months [5].