Currently, the main contradiction in the midstream lidar manufacturing process is the profit path. Technological progress is certainly one aspect, but large-scale mass production capacity can solve urgent needs. Since 2023, the price war between downstream OEMs has gradually spread to the middle and upper reaches. The downward pressure on lidar ASP is strong, and midstream profits are under pressure. For Suteng Juchuang, revenue side: Based on existing targeted projects, the company will expand production and delivery levels, expand the potential customer base, and actively improve products and solutions to meet the diverse needs of customers. Profit side: There is an urgent need to improve the gross margin. On the one hand, raw material procurement costs are declining. On the other hand, as the company's large-scale mass production level continues to rise, capacity utilization is expected to increase significantly, so as to jointly optimize the gross margin level. In terms of period costs, based on lidar platforms and highly scalable product development strategies, R&D cost rates are expected to continue to be optimized, and multiple measures are also expected to improve marketing efficiency and management and operation efficiency.

Robosense (Robosense) is the world's leading lidar manufacturer. The company's products and services are widely used in ADAS and robotics. Among them, designated partner car companies rank first in the world in the number of customers and models, and SOP partner car companies rank first in the world in the number of customers. The company has three major platforms, R, M, and E, which correspond to several types of products such as one-dimensional mechanical lidar, two-dimensional MEMS semi-solid state lidar, and two-dimensional Flash pure solid-state blinding lidar. Among them, the M platform is currently the company's main sales source. At the financial level, in recent years, as the share of revenue from ADAS has increased significantly, the company's gross margin is under pressure. In terms of period expenses, R&D expenses are high, but both gross margin and net interest rate have shown a marginal improvement trend, and the profit path has gradually become clear.

Industry: The space is vast, competition is fierce, and long-term profit levels can be expected. Since 2023, the price war between downstream automakers in the industry has become increasingly intense, and lidar accounts for a relatively high proportion of downstream costs, so the downward pressure on midstream ASP has increased. The degree of upstream localization of the industry is not high, and suppliers have a strong voice, especially in chip and other sectors. As a result, midstream manufacturing costs remain high, and midstream profits are under pressure. Looking forward to the future, demand for terminals is still strong. Intelligent driving is transitioning from L2 to L3+, urban NOA continues to be popular, lidar penetration is accelerating, and solid-state blindness replacement brings incremental demand. Industry technology iteration continues, and domestic replacement of upstream lasers and detectors dominates the market with a cost advantage. FPGA is still the mainstream solution for main control chips, but it is migrating to SoC solutions, and the midstream cost side is expected to continue to decline. At the same time, clearance in the midstream market has accelerated, and many foreign manufacturers have shrunk or withdrawn, market concentration has increased, and the competitive pattern has been continuously optimized. It is expected that industry leaders will achieve significant cost reduction and efficiency in the medium to long term after mass production, opening up room for upward gross margins.

The long-term profit margin level of the midstream lidar manufacturing process can be expected.

The mass production capacity is strong, and the profit path is gradually clear. We believe that the company has three core logics: (1) leading technology, a combination of software and hardware. The company has been deeply involved in the lidar industry for many years, has a deep understanding of industry trends, continuous iteration of technology routes, rich product matrices, and full-stack sensing capabilities combining software and hardware, which is conducive to speeding up commercialization and achieving product implementation. (2) Strong customer base and strong mass production capacity. The company has a strong and diverse customer base, leading the world in the number of fixed models, SOP customers, and SOP models. In terms of mass production capacity, the company currently has three major factories in Shiyan, Honghualing, and Liteng, and the capacity utilization rate is still rising. (3) The profit path is gradually clarified. The gross margin sector is expected to continue to improve. On the one hand, raw material procurement costs have declined sharply since 2023, and high-priced chip inventory has been exhausted in September 2023; on the other hand, as the company's large-scale mass production level continues to rise, capacity utilization is expected to increase significantly, thus jointly optimizing the gross margin level.

In terms of period costs, based on lidar platforms and highly scalable product development strategies, R&D cost rates are expected to continue to be optimized, and multiple measures are also expected to improve marketing efficiency and management and operation efficiency.