Core Viewpoint - The competition in the commercialization of intelligent driving is fierce, and the first-mover advantage may not be sustainable in the long run [1] Group 1: Market Dynamics - In February, BYD launched 21 intelligent driving models, marking a shift in its leadership's stance on autonomous driving, emphasizing the importance of AI in the second half of the market [2] - The intelligent driving technology is evolving from end-to-end solutions to VLA (Vision-Language-Action) models, driven by advancements in AI [2][4] - The Robotaxi market is becoming a focal point for competition among automakers, with projections indicating significant growth in China's Robotaxi market from approximately $54 million in 2025 to $47 billion by 2035, with a compound annual growth rate exceeding 96% [9] Group 2: Chip Technology and Competition - The AI chip market for automotive applications is experiencing shifts due to changes in technology routes and automakers' desire for supply chain autonomy, creating opportunities for latecomers [3][5] - Companies like Black Sesame Intelligence are developing competitive AI chips, such as the A2000, which is expected to enter mass production by the end of next year [3][8] - The demand for high-performance AI chips is increasing, with companies like NVIDIA and Huawei dominating the market, but the landscape is evolving as new players emerge [4][5] Group 3: Technical Evolution and Requirements - The transition from L2 to L3/L4 autonomous driving requires significant advancements in technology, including hardware redundancy and compliance with traffic regulations [10][11] - Automakers are investing heavily in AI to enhance the human-like capabilities of intelligent driving systems, with some companies adopting a dual redundancy approach in their systems [11][12] - The A2000 chip from Black Sesame Intelligence is designed to support various AI models efficiently, integrating multiple processing units to handle complex tasks [12][14] Group 4: Strategic Partnerships and Ecosystem - The success of AI chip companies hinges on their ability to provide comprehensive solutions beyond just hardware, necessitating collaboration with automakers and algorithm developers [17][18] - Black Sesame Intelligence is focusing on building an open platform and has established partnerships with various companies to enhance its ecosystem [18] - The competitive landscape is expected to intensify as high-performance, open AI chip platforms become increasingly sought after in the market [18]

Group 1: Revenue Growth and Drivers - The company achieved a revenue of approximately 213 million CNY in the first half of 2025, representing a 24% increase compared to the previous year [3] - Key drivers for revenue growth include: - Policy promotion leading to a shift from voluntary to mandatory compliance testing for intelligent connected vehicles [3] - Increased demand from the automotive industry as manufacturers accelerate their transition to smart and electric vehicles [3] - Capacity release and customer breakthroughs following the operational launch of new testing facilities [3] Group 2: Project Contributions and Capacity Utilization - The second phase project contributed approximately 26 million CNY in revenue in the first half of the year, achieving near breakeven [4] - The project is in a cultivation period where demand drives capacity release, with increasing certainty of future growth as standards advance [4] - The company’s first-phase testing facility has potential for improved capacity utilization, while the second phase is still ramping up [10] Group 3: Profitability and Financial Performance - The Extreme Testing Center reported a net profit of 15.27 million CNY in the first four months of 2025, double that of the entire previous year [4] - The net asset return rate for the Extreme Testing Center was 15.08% [4] - The company’s accounts receivable management is healthy, with risks considered low due to the nature of the business model and customer quality [13] Group 4: Market Trends and Strategic Positioning - Manufacturers are increasingly focusing on extreme environment testing due to market competition and consumer demand for reliable performance in various conditions [6] - The company plays a significant role in the formulation of automotive industry standards, participating in multiple standard-setting committees [8] - The company is exploring opportunities for expansion in regions outside East China, assessing potential partnerships and acquisition strategies [9] Group 5: Future Outlook and Innovations - The company is actively researching the feasibility of overseas testing facilities to support domestic manufacturers' global expansion [11] - Investments are being made in low-altitude economy testing capabilities, including the establishment of a low-altitude flight monitoring platform [12] - The company is monitoring industry policies that may enhance accounts receivable turnover and cash flow stability [13]

Investment Rating - The report maintains a "Buy" rating for the company, with a target price of HKD 41.89, indicating a potential upside of 21.4% from the current price of HKD 34.50 [1][10][11]. Core Insights - The company is expected to experience a peak in robot lidar deliveries in the second half of the year, with a significant increase in sales volume and revenue [2][6]. - The gross margin for lidar products is steadily improving, with the overall gross margin rising to 27.7% in Q2 2025, up 4.2 percentage points from the previous quarter [6][7]. - The company has made significant advancements in its self-developed SPAD-SOC chip, which is expected to enhance production capabilities and market competitiveness [6][7]. Financial Overview - Revenue is projected to grow from RMB 1,120 million in 2023 to RMB 4,456 million by 2027, reflecting a compound annual growth rate (CAGR) of approximately 45.2% [5][13]. - The net profit is expected to improve from a loss of RMB 4,331 million in 2023 to a profit of RMB 263 million by 2027, indicating a turnaround in profitability [5][13]. - The company reported a revenue of RMB 455 million in Q2 2025, a 24% increase year-over-year, with a notable 133% increase in gross profit [6][7]. Market Performance - The stock has shown a year-to-date increase of 12.38%, with a 52-week high of HKD 50.40 and a low of HKD 11.02 [4][6]. - The average daily trading volume is approximately 6.78 million shares, indicating active market participation [4]. Sales and Production Metrics - In Q2 2025, the company sold 158,200 units of lidar, a 29% increase year-over-year, with robot lidar sales surging by 632% [6][7]. - The average selling price (ASP) for lidar products was approximately RMB 2,600, reflecting a slight decrease of 5% from the previous quarter [6]. Future Outlook - The company is expected to achieve profitability by 2026, driven by scale effects and improved operational efficiencies [6][8]. - The upcoming release of the AC2 robot in the second half of the year is anticipated to capitalize on the growing demand for embodied intelligence in robotics [6].