In the first half of the 2024 fiscal year, Superstar Juchuang (02498.HK) achieved total revenue of RMB 730 million, of which 83.8% and 10.7% came from the sale of lidar applications for ADAS and robots, respectively. The Group's gross margin increased to 13.6% in the first half of the fiscal year, and net loss decreased to 270 million yuan from 770 million yuan in the same period last year.

Sales of lidar for robotics have explosive growth potential: Superstar Juchuang (02498.HK) recorded 8,900 lidar sales for robotics in the first half of the 2024 fiscal year, mainly from the Helios and Bpearl series, which have lower unit prices and profit margins. According to the Group's guidelines, the quarterly sales volume in the third or fourth quarter of this year is expected to reach the level of the whole of last year, and the application will also become more widespread, especially in the cleaning and logistics industry. The E1 was originally an automotive lidar, but its accuracy and vertical visibility make it a flat alternative to robotic lidar, and its contribution to the Group's lidar sales business for robotic applications will be even more significant. In the future, the Group will focus on the business development of AI robotic lidar. The E-platform platform lays the foundation for the Group, and the future application potential of Pangda is expected to bring significant growth to the Group.

Product iteration drives sales of ADAS lidar applications: Compared to the first quarter of 2024, the sales volume of Lidar applications used in ADAS remained relatively flat in the second quarter of the second quarter, but gross margin increased by 0.6 percent points to 11.2% on a quarterly basis. Although there is still some slight pressure on the average sales price in the future, the gross margin of this business is expected to improve further thanks to scale effects. As an affordable alternative to M1P, the Group began delivering MX in small batches in the third quarter. Customers are expected to gradually use MX to replace the M1P as a lidar for next-generation automobiles. At the same time, lower pricing is also expected to drive this product to penetrate the low-end automobile market. Due to the high sales volume of the low-end automobile market, which can bring more demand for products, we expect MX's contribution to be more significant in the second half of the fiscal year 2025, but changes in the product mix will lead to a further decline in the average sales price in 2025/2026.

Continuously improving gross profit margin: We believe that Suteng Juchuang (02498.HK)'s gross margin will continue to improve. On the ADAS side, we expect the gross margin of this business segment to increase by 2 to 9 percent due to i) scale effects and ii) product iteration.

Furthermore, the delivery of E1 will lead to a sharp drop in the average sales price of lidar sales operations used in robots, and an increase in product penetration will improve the group's revenue and gross margin.

Product iteration led to volume price increases and decreases: We continue to believe that Superstar Juchuang (02498.HK) will be able to achieve positive free cash flow in 2025 and record balance of payments in 2026. We have moderately lowered our forecasts for the group to reflect changes in the product mix. The increase in sales share of lower-priced E1 and MX will reduce the group's revenue and profit levels. We reiterated the “buy” rating to reflect potential sales volume and profit margin growth, but reduced the target price to HK$19.90 per share to reflect the impact of product iterations.