Core Viewpoint - Over the past decade, China's intelligent driving industry has transitioned from a closed chain to an inclusive ecosystem, driven by technological advancements and collaborative efforts among local companies [1][36]. Group 1: Industry Evolution - In 2011, Tesla's CEO Elon Musk dismissed BYD as a competitor, highlighting the significant gap in technology and product appeal between Chinese automakers and Tesla at that time [2][3]. - By 2024, Chinese automakers like BYD and Geely have surpassed Tesla in sales, becoming part of the top ten global car manufacturers, showcasing the rapid evolution of the industry [4]. - The core of Tesla's sustained optimism lies in its self-developed chips and intelligent driving capabilities, which have spurred a wave of research and development in China's intelligent driving sector [4]. Group 2: Key Players and Partnerships - The critical turning point for China's intelligent driving industry occurred between 2019 and 2020, marked by the emergence of companies like Horizon Robotics and Momenta, which began to establish themselves in the market [6]. - The collaboration between Changan Automobile and Horizon Robotics exemplifies how local companies are building flexible and open supply chain systems, enhancing their control over core technologies [10][12]. - The partnership between Li Auto and Horizon Robotics allowed for rapid development and deployment of advanced driving features, demonstrating the importance of open collaboration in overcoming technological challenges [13][17]. Group 3: Technological Advancements - The shift from Mobileye's closed delivery model to more open and collaborative approaches has catalyzed the development of local intelligent driving technologies, enabling companies to gain autonomy over their systems [9][18]. - Horizon Robotics' introduction of the Journey 5 chip, which offers high performance and supports advanced driving needs, has positioned the company to compete in the high-end intelligent driving market [23][24]. - The "HSD Together" model proposed by Horizon Robotics aims to enhance collaboration across the supply chain, significantly reducing development costs and time to market for automotive companies [27][28]. Group 4: Market Accessibility and Inclusivity - The evolution of intelligent driving technology is making advanced features more accessible to a broader range of consumers, breaking down price barriers that previously limited adoption to high-end vehicles [30][31]. - BYD's upcoming "Heavenly Eye" system, powered by Horizon Robotics' Journey 6 chip, aims to provide advanced driving capabilities across its entire model range, including lower-priced vehicles [30]. - The introduction of Horizon Robotics' HSD full-scene driving assistance system is set to make high-level intelligent driving features available in mid-range vehicles, promoting inclusivity in the market [31][33].

Core Insights - The domestic smart driving industry is experiencing rapid growth, with Horizon achieving a significant milestone of over 10 million units shipped by August 2025, making it the first smart driving technology company in China to reach this level [2] - Horizon's CEO, Yu Kai, has set ambitious targets for the Horizon SuperDrive (HSD) system, aiming for mass production of 10 million units in the next 3-5 years [2][5] - The company has seen a substantial increase in the average selling price of its smart driving solutions, which rose by 70% year-on-year, driven by the new generation of products [3] Group 1: Product Development and Market Position - Horizon's Journey family of products has achieved over 10 million units shipped in just five years, with significant partnerships with major automotive brands like BYD, Li Auto, and Aion [2] - The new Horizon Journey 6E/M models are expected to be featured in over 15 new vehicles this year, indicating strong market demand [3] - The HSD system, developed from the Journey 6P, is recognized as China's version of Tesla's Full Self-Driving (FSD) and is positioned to meet various driving needs from L2 to full urban driving scenarios [4] Group 2: Financial Performance and Future Outlook - Horizon anticipates a total shipment of around 4 million units for the year, with a balanced distribution between low-end and mid-to-high-end products [5] - The company has secured partnerships with over 40 global automakers, with more than 100 models featuring mid-to-high-end driving assistance functions [3][6] - Horizon's investment in cloud computing for model training has increased significantly, leading to a reported operating loss of 1.11 billion yuan in the first half of the year, but the company remains optimistic about future profitability [6]

Core Viewpoint - Company has transformed into a leading supplier of intelligent driving solutions over the past decade, focusing on full-scene intelligent driving solutions and achieving significant revenue growth with a CAGR of 72.2% from 2021 to 2024 [2][36]. Company Overview - Company has established a comprehensive technology stack covering algorithms, dedicated processing architecture (BPU), and development toolchains, positioning itself as a "chip + software" system-level intelligent driving company [4][9]. - The company has formed a complete layout of intelligent driving chip solutions covering levels L2 to L4, with over 310 models targeted by the end of 2024 [4][12]. - The company has built a large and high-quality customer base, including over 40 cooperative automakers and covering more than 290 models [4][36]. Business Segments - The company's revenue is primarily derived from automotive solutions, which accounted for 97% of total revenue in 2024, with product solutions contributing 27.9% and authorized service business contributing 69.1% [28][36]. - Non-automotive solutions, which focus on smart home applications, accounted for 3% of total revenue in 2024 [28][36]. Financial Performance - The company's revenue increased from 467 million RMB in 2021 to 2.384 billion RMB in 2024, with a CAGR of 72.2% [36][41]. - The gross margin has remained stable around 70%, increasing to 79% in 2024 due to the higher contribution from high-margin authorized service business [36][41]. - Operating losses have been controlled, with losses around 2 billion RMB, and the company is expected to achieve breakeven in the coming years as revenue increases and costs are managed [37][41]. Industry Trends - The intelligent driving market is expected to accelerate penetration, with 2025 anticipated to be a pivotal year for "intelligent driving equality," as traditional automakers ramp up their intelligent driving strategies [3][54]. - The price of high-level intelligent driving packages is decreasing, making advanced driving features more accessible to consumers [3][54]. - The integration of intelligent driving technology into mainstream vehicles is expected to become a standard feature, with major automakers like BYD and Xpeng leading the charge [3][54].

Investment Rating - The report initiates coverage on Horizon Robotics with a "Buy" rating, setting a target price of HKD 9.28 based on a 31.1X PS for 2025 [1][7][5]. Core Views - Horizon Robotics is a leading supplier of advanced driver assistance systems (ADAS) and autonomous driving solutions, focusing on empowering vehicles and robots through intelligent solutions [14][23]. - The company is expected to benefit from the rapid growth of high-level assisted driving functions driven by major automakers like Li Auto, BYD, and Volkswagen [1][2]. - The domestic market for intelligent driving SoC chips is projected to grow significantly, with the market expected to expand from approximately USD 2 billion in 2024 to USD 6.2 billion by 2030 [2]. Company Overview - Horizon Robotics has a complete product matrix and strong software delivery capabilities, with a focus on high-performance chips and proprietary algorithms [3][14]. - The company has achieved significant milestones, including the mass production of various chip series and partnerships with major Tier 1 suppliers [4][14]. - The company’s revenue is projected to grow significantly, with expected revenues of RMB 3.66 billion, RMB 5.54 billion, and RMB 7.82 billion for 2025, 2026, and 2027 respectively, reflecting year-on-year growth rates of 53%, 51%, and 41% [5][6]. Market Dynamics - The intelligent driving industry is entering a high-growth phase, with the penetration rate of advanced intelligent driving expected to increase rapidly [2][20]. - Domestic chip suppliers are well-positioned to meet the demand for cost-effective and reliable solutions, which aligns with the needs of downstream automakers [2][21]. - The report highlights the potential for Horizon Robotics to expand into international markets, particularly as domestic brands seek to innovate globally [21][24]. Financial Projections - The company is expected to achieve a chip shipment volume of 4 million, 5.22 million, and 6.93 million units in 2025, 2026, and 2027 respectively, with corresponding revenues of RMB 3.66 billion, RMB 5.54 billion, and RMB 7.82 billion [5][6]. - The report anticipates a significant increase in average selling price (ASP) per vehicle as the company scales its operations and introduces new algorithms [20][21]. Competitive Landscape - Horizon Robotics faces competition from international players like Mobileye and NVIDIA, but the report suggests that its domestic advantages in cost and supply chain reliability will be beneficial [4][21]. - The company has established partnerships with leading global Tier 1 suppliers, which may enhance its competitive positioning in the international market [21][24].