17 September 2025 Analyst, China Autos The Hongkong and Shanghai Banking Corporation Limited li01.yang@hsbc.com.hk +852 2288 6216 Battery and autonomous supply chains in focus. For battery, we see a potential turning point in pricing in 2H25-1H26. Notably, some ESS battery products have already shown modest price improvements. Stronger-than-expected domestic ESS demand after the cancellation of the mandatory storage policy and growing orders from overseas markets (such as Europe, the Middle East, and Austra ...

Core Viewpoints - The company achieved a sales revenue of 1.567 billion yuan in the first half of 2025, representing a year-on-year growth of 67.06%, while the net profit was -5.233 billion yuan, compared to -5.089 billion yuan in the same period last year [1] - The market share for basic and overall assisted driving solutions among Chinese car manufacturers reached 45.8% and 32.4% respectively, maintaining the leading position [1] - The company’s processor shipments doubled to 1.98 million units, with hardware supporting highway assisted driving reaching 980,000 units, a sixfold increase from the previous year [1] Financial Performance - The sales gross margin and net margin for the first half of 2025 were 65.36% and -334.00% respectively, down from 79.04% and -543.59% in the same period last year [1] - Research and development expenses increased by 62% year-on-year, primarily due to rising cloud service costs and increased salaries for R&D personnel [1] Market Expansion - As of June 2025, the company has secured nearly 400 new model designations, with over 100 models featuring highway assisted driving capabilities [2] - The company is actively developing the HSD solution to address more complex driving scenarios, which has already received designations from multiple vehicle manufacturers [2] Profit Forecast and Investment Recommendations - Revenue projections for the company are estimated at 3.524 billion yuan, 5.254 billion yuan, and 7.898 billion yuan for 2025, 2026, and 2027 respectively, with net profits expected to be -1.836 billion yuan, -1.019 billion yuan, and 0.211 billion yuan [3] - The company is viewed positively as a key supplier of domestic intelligent driving chips and algorithms, benefiting from the trend of automotive intelligence [3]

Investment Rating - The report maintains a "Buy" rating for the company, indicating a positive outlook based on its position as a key supplier in the domestic smart driving chip and algorithm market, benefiting from the trend of automotive intelligence [4]. Core Insights - The company achieved a sales revenue of 1.567 billion yuan in the first half of 2025, representing a year-on-year growth of 67.06%, while the net profit was -5.233 billion yuan, slightly worse than the previous year's -5.089 billion yuan [1]. - The market share for basic and overall assisted driving solutions among Chinese automakers reached 45.8% and 32.4%, respectively, maintaining the leading position [1]. - The shipment of the company's Journey series processors doubled to 1.98 million units, with hardware supporting highway assisted driving reaching 980,000 units, a sixfold increase compared to the same period last year [1]. - The sales gross margin decreased to 65.36% from 79.04% year-on-year, primarily due to changes in revenue composition, with a significant increase in automotive product solutions [2]. - The company has secured nearly 400 new model designations, with over 100 models featuring highway assisted driving capabilities, and is actively expanding its overseas customer base [3]. Financial Forecast and Valuation - Projected revenues for 2025, 2026, and 2027 are 3.524 billion yuan, 5.254 billion yuan, and 7.898 billion yuan, respectively, with expected net profits of -1.836 billion yuan, -1.019 billion yuan, and 211 million yuan [4][6]. - The company is expected to benefit from the automotive intelligence trend, with a projected annual revenue growth rate of 48% in 2026 and 49% in 2027 [6][12]. - The earnings per share (EPS) is forecasted to improve from -0.13 yuan in 2026 to 0.02 yuan in 2027 [6].

Core Viewpoint - The article discusses the evolution of autonomous driving technology, particularly focusing on the transition from end-to-end systems to Vision-Language-Action (VLA) models, highlighting the differing approaches and perspectives within the industry regarding these technologies [6][32][34]. Group 1: VLA and Its Implications - VLA, or Vision-Language-Action Model, aims to integrate visual perception and natural language processing to enhance decision-making in autonomous driving systems [9][10]. - The VLA model attempts to map human driving instincts into interpretable language commands, which are then converted into machine actions, potentially offering both strong integration and improved explainability [10][19]. - Companies like Wayve are leading the exploration of VLA, with their LINGO series demonstrating the ability to combine natural language with driving actions, allowing for real-time interaction and explanations of driving decisions [12][18]. Group 2: Industry Perspectives and Divergence - The current landscape of autonomous driving is characterized by a divergence in approaches, with some teams embracing VLA while others remain skeptical, preferring to focus on traditional Vision-Action (VA) models [5][6][19]. - Major players like Huawei and Horizon have expressed reservations about VLA, opting instead to refine existing VA models, which they believe can still achieve effective results without the complexities introduced by language processing [5][21][25]. - The skepticism surrounding VLA stems from concerns about the ambiguity and imprecision of natural language in driving contexts, which can lead to challenges in real-time decision-making [19][21][23]. Group 3: Technical Challenges and Considerations - VLA models face significant technical challenges, including high computational demands and potential latency issues, which are critical in scenarios requiring immediate responses [21][22]. - The integration of language processing into driving systems may introduce noise and ambiguity, complicating the training and operational phases of VLA models [19][23]. - Companies are exploring various strategies to mitigate these challenges, such as enhancing computational power or refining data collection methods to ensure that language inputs align effectively with driving actions [22][34]. Group 4: Future Directions and Industry Outlook - The article suggests that the future of autonomous driving may not solely rely on new technologies like VLA but also on improving existing systems and methodologies to ensure stability and reliability [34]. - As the industry evolves, companies will need to determine whether to pursue innovative paths with VLA or to solidify their existing frameworks, each offering unique opportunities and challenges [34].

Core Viewpoint - The company is experiencing significant revenue growth driven by the mass production of the J6 series and is maintaining a leading market share in the ADAS front-view integrated machine and autonomous driving computing solutions market in China [1][2]. Group 1: Financial Performance - In H1 2025, the company achieved revenue of 1.567 billion, a year-on-year increase of 67.6%, surpassing Bloomberg consensus expectations of 1.435 billion [2]. - The revenue from products and solutions reached 778 million, with a year-on-year increase of 250%, and delivery volume approached 2 million units, up 106% year-on-year [2]. - The average selling price increased by 70% year-on-year, with mid-to-high-end product revenue accounting for over 80% of the products and solutions revenue [2]. Group 2: Production and Market Expansion - The HSD has secured over 10 models from multiple OEMs, with mass production expected in H2 2025, which is anticipated to drive short-term growth [2]. - The company has made significant strides in internationalization, securing 30 domestic models from 9 joint venture car companies and 2 foreign car companies for overseas models, with an expected total delivery of over 7.5 million units [2]. - Collaborations with Bosch, Denso, and Continental are expected to enhance the company's market position through partnerships with overseas Tier 1 suppliers [2]. Group 3: Future Growth Potential - The company is expected to collaborate with Robotaxi operators in H2 2025, aiming to deploy tens of millions of HSD units within 3-5 years, which will accelerate the deployment of Robotaxi technology [2].

Core Viewpoint - Horizon Robotics-W (09660) demonstrated strong performance in the first half of the year, with total revenue increasing by 68% year-on-year, driven by hardware shipments reaching 2 million units and an average product selling price rising by over 60% [1] Group 1: Financial Performance - Total revenue increased by 68% year-on-year [1] - Hardware shipments reached 2 million units [1] - Average product selling price rose by over 60% [1] Group 2: Market Outlook - Increased visibility of J6B shipments in overseas markets [1] - Successful progress of J6P and upgraded HSD models [1] - Anticipated significant contribution to shipments in the passenger vehicle and Robotaxi sectors over the next five years [1] Group 3: Analyst Predictions - Revenue forecasts for Horizon Robotics for 2025 to 2027 have been raised by 3% to 5% [1] - Target price increased from HKD 10.5 to HKD 11 [1] - Business developments in the coming months are expected to act as catalysts for stock price growth, with a reaffirmation of the "outperform" rating [1]

Core Viewpoint - Horizon Robotics-W (09660) demonstrated strong performance in the first half of the year, with total revenue increasing by 68% year-on-year, driven by hardware shipments of 2 million units and an average product selling price increase of over 60% [1] Group 1 - The company has seen a significant increase in hardware shipment volumes, reaching 2 million units [1] - The average selling price of products has increased by over 60% year-on-year, contributing to revenue growth [1] - The visibility of J6B shipments in overseas markets has improved, along with successful progress in J6P and the upgraded HSD [1] Group 2 - The firm has raised its revenue forecasts for Horizon Robotics for 2025 to 2027 by 3% to 5% [1] - The target price for the stock has been increased from HKD 10.5 to HKD 11 [1] - Future business developments are expected to act as catalysts for the stock price, leading to potential further upgrades in ratings [1]

Core Viewpoint - Horizon Robotics-W (09660) has shown significant stock performance, with a 9.07% increase to HKD 8.66 and a trading volume of HKD 39.56 billion following the release of its interim results, indicating strong market confidence in the company's growth potential [1] Financial Performance - The company reported a revenue of RMB 1.567 billion for the first half of the year, representing a year-on-year growth of 67.6% [1] - Gross profit reached RMB 1.024 billion, with a comprehensive gross margin of 65.4% [1] - Cash reserves stood at RMB 16.1 billion, providing a solid financial foundation for future growth [1] Market Position - The CEO stated that the company maintained a leading market share of 45.8% in the ADAS (Advanced Driver Assistance Systems) basic auxiliary driving market and 32.4% in the overall intelligent auxiliary driving computing solutions market for domestic brands in mainland China [1] Analyst Insights - Citi's research report highlighted the strong performance of Horizon Robotics, with total revenue growth of 68% year-on-year, driven by hardware shipments of 2 million units and an average product selling price increase of over 60% [1] - The report anticipates increased visibility in overseas shipments of the J6B model, along with successful progress in the J6P and upgraded HSD models, predicting significant contributions to shipments in the passenger vehicle and Robotaxi sectors over the next five years [1] - The revenue forecast for Horizon Robotics for 2025 to 2027 has been raised by 3% to 5%, with the target price increased from HKD 10.5 to HKD 11, suggesting that upcoming business developments could act as catalysts for stock price growth and reaffirming a "outperform" rating [1]

Core Viewpoint - Horizon Robotics reported strong mid-year performance with significant revenue growth and market leadership in the ADAS sector [1] Financial Performance - Revenue for the first half of the year reached 1.567 billion yuan, representing a year-on-year increase of 67.6% [1] - Gross profit amounted to 1.024 billion yuan, with a comprehensive gross margin of 65.4% [1] - Cash reserves stood at 16.1 billion yuan [1] Market Position - Horizon Robotics maintained a 45.8% market share in the ADAS basic auxiliary driving market, ranking first [1] - The company also held a 32.4% market share in the overall intelligent auxiliary driving computing solutions market for domestic brands [1] Analyst Insights - Credit Lyonnais highlighted the strong performance, noting a 68% year-on-year revenue growth driven by hardware shipments of 2 million units and an average product price increase of over 60% [1] - The J6B model is expected to see increased visibility in overseas markets, with significant contributions anticipated from J6P and the upgraded HSD in the passenger vehicle and Robotaxi sectors [1] - Revenue forecasts for Horizon Robotics from 2025 to 2027 have been raised by 3% to 5%, with the target price increased from 10.5 HKD to 11 HKD [1]

Summary of Horizon Robotics Conference Call Company Overview - **Company**: Horizon Robotics - **Ticker**: 9660.HK - **Industry**: China Autos & Shared Mobility - **Market Cap**: Rmb97,476.6 million - **Fiscal Year Ending**: December 2025 Key Financial Highlights - **1H25 Shipments**: Total shipments doubled year-over-year to 1.98 million units, with nearly 50% from AD products compared to less than 20% in 1H24, driven by major customers BYD and Li Auto, which accounted for over 50% of AD shipments [2] - **Full-Year Guidance**: Management maintains a full-year shipment guidance of approximately 4 million units, supported by increased orders from Geely, Chery, and Chang'an in 2H25 [2] - **Gross Profit Margin (GPM)**: GPM fell 13.6 percentage points year-over-year to 65.4% in 1H25, attributed to a shift in revenue mix away from licensing revenue. Management expects blended GPM to stabilize between 60-70% [3] - **R&D Expenses**: R&D expenses increased by 62% year-over-year to Rmb2.3 billion, reflecting investments in computing power for cloud training. Management indicated that while R&D expenses will continue to rise, other expenses such as headcount will be contained [3] Product Developments - **New Chip Launch**: The newly launched J6B chip is expected to see growing demand overseas for ADAS applications, with higher average selling price (ASP) and margin compared to legacy models [4] - **Upcoming Products**: The J6P and HSD debut on Chery and Chang'an in 2H25, along with the upcoming J6B, are anticipated to support further ASP growth [2] Market Position and Opportunities - **Market Share Gains**: Horizon Robotics is gaining market share in the AD chip market, with key bright spots including ASP expansion and overseas project wins, including several global projects from two Japanese OEMs projected to yield 7.5 million shipments over their lifecycle [8] - **Customer Base Expansion**: The company has secured 30 projects from nine joint venture brands in China, indicating a broadening customer base [8] Financial Projections - **Adjusted Net Loss**: Horizon reported an adjusted net loss of Rmb1.3 billion in 1H25, widening from Rmb804 million in 1H24 due to lower GPM and higher R&D spending [8] - **Revenue Forecast**: Projected revenue for the fiscal year ending December 2025 is Rmb3,590 million, with an expected EBITDA loss of Rmb2,539 million [5] Risks and Considerations - **Upside Risks**: Faster-than-expected ADAS/AD adoption growth in China and expanding customer base with additional key customers [11] - **Downside Risks**: Slower-than-expected ADAS/AD adoption, supply chain disruptions, and successful in-house hardware design initiatives by OEMs [11] Analyst Ratings and Price Target - **Stock Rating**: Overweight - **Price Target**: HK$10.50, representing a 32% upside from the current price of HK$7.94 [5] Conclusion Horizon Robotics is positioned for growth in the AD chip market, with strong shipment performance and new product launches. However, the company faces challenges related to profitability and competition in the rapidly evolving automotive technology landscape.