Incidents:

Recently, the company announced that it has signed a joint venture agreement with Hangsheng Electronics to establish a joint venture in Suzhou. The joint venture is mainly engaged in R&D, production and sales of integrated cockpit products. Both parties each hold 50% of the shares, and the proposed registered capital for the joint venture is RMB 100 million.

The cockpit integration market space is vast, and the two sides are expected to have a synergetic effect. The company is actively promoting mass production of cockpit fusion products based on a single chip that simultaneously realizes autonomous driving and smart cockpit functions. The product launch is expected to increase product sales by reducing vehicle costs. We believe that both parties are leading domestic autonomous driving companies and smart cockpit companies. The company's current cooperation with Hangsheng Electronics is expected to give full play to the technical and customer advantages of both parties and promote the development of integrated cockpit products.

The future of intelligent driving has arrived, waiting for the inflection point of the company's performance. As a leading provider of autonomous driving solutions in China, the company focuses on autonomous driving domain controllers. It currently has commercialized L2 to L2+ autonomous driving solutions, is developing L2 to L4 autonomous driving solutions for automakers (OEMs), and mass-produces the first autonomous driving solution in 2020. As of 2022, the company's domestic share has reached 8.6%, making it the fourth largest autonomous driving domain controller provider in China. According to the company's prospectus, the company has obtained fixed letters from 15 well-known OEM customers, covering Geely Automobile, Great Wall Motor, Chery Automobile, Dongfeng Motor, etc. At the same time, 16 of the 17 autonomous driving domain controller fixed letter projects obtained by the company are exclusive suppliers, indicating that the company has received high recognition from customers in the field of autonomous driving. Intelligent driving is the general trend, and the market space is broad. As the technology gradually matures, the level of intelligent driving will evolve from the current L2/L2+ to L3. At that time, the driver's operation of the vehicle will be drastically reduced, and the user experience will be significantly improved, thereby greatly increasing the penetration rate of intelligent driving. In recent years, the country has also accelerated the introduction of relevant policies to promote the implementation of intelligent driving. Beijing, Shanghai, Guangzhou and other places have introduced relevant policies and regulations on the safety and regulation of smart driving. Therefore, under the trend of vigorous policy promotion and continuous upgrading of industrial technology, the smart driving penetration rate will increase significantly in the next few years, the industrial space is expected to grow dramatically, and the company is expected to fully benefit as a leading domestic autonomous driving solution provider.

Profit forecast: The intelligent driving industry has huge potential, and the gradual increase in penetration rate will bring great opportunities for industrial chain development. As a leader in the field of autonomous driving, the company is expected to fully enjoy the dividends of industry development, and revenue and profits will further increase. We expect the company to achieve net profit to mother of -1.08/ 2.11/0.356 billion yuan in 2024-2026, corresponding PE -/ 28/ 17 times. The 2025 profit was estimated at 39 times PE, and the target price was HK$39.83. It was covered for the first time, and a “buy” rating was given.

Risk warning: Downstream demand falls short of expectations, profit forecasts and valuation judgments fall short of expectations.