Core views

Market-leading supplier of intelligent driving solutions. Horizon Robotics was founded in July 2015. The business layout revolves around artificial intelligence chips to provide core technologies and services including smart chips, dedicated software, algorithms, and open tool chains for assisted driving (ADAS) and advanced autonomous driving (AD). In the 9 years since its establishment, the company's “Journey” series has shipped more than 5 million pieces (as of April 2024), enabling more than 110 mass-produced and marketed models. The company officially registered on the Hong Kong Stock Exchange on October 24, 2024. The initial price was HK$3.99 per share, and the amount raised was HK$5.407 billion.

Market opportunities: In the era of intelligent driving, the chip base is snowy and snowy. 1. High-end smart driving is speeding up the volume, and demand for major computing power chips is strong. Automotive electronic architectures are shifting from distributed to domain centralization, and advanced levels of autonomous driving drive the demand for high-computing power chips. Smart driving functions continue to be iterated+cost performance+policy support, and the penetration rate of autonomous passenger cars is rapidly increasing. According to Insight Consulting's forecast, the penetration rate of smart cars in China will reach 81.2% and 99.7% in 2026 and 2030, respectively, and the driver chip market will expand. 2. The company has a simultaneous layout at the middle and low end, and the trend of domestic substitution is obvious. The cost of smart driving functions has declined. Taking the high-speed NOA function as an example, the price of models equipped with them has dropped below 0.15 million yuan. The industry has evolved from technology-driven to cost-driven, and cost performance has become an increasingly important factor to consider in chip selection. Furthermore, from a national strategic perspective, autonomous and controllable chips+global leadership of smart cars is a major policy orientation.

As of June 30, 2024, a total of 25 OEMs have cooperated directly with the company or through tier-1 supplier customers, such as Ideal Auto, BYD, Chery Auto, etc., with a cumulative total of 275 models (excluding terminated projects).

Core competencies: software and hardware collaboration, leading domestic autonomous driving solutions. Large-scale applications of advanced intelligent driving rely on solutions with high processing capacity, high reliability, low latency, low energy consumption, and high cost performance. Therefore, advanced intelligent driving solutions require software and hardware co-design to achieve the necessary system-level performance-level reliability. In terms of hardware, the company has already mass-produced the Journey 2, Journey 3, and Journey 5 chips, and the upcoming mass production of the Journey 6 chip family, which is suitable for different application scenarios. In terms of algorithms, the company provides a series of software and algorithm solutions for low-level to advanced intelligent driving, named Horizon Mono, Horizon Pilot, and Horizon SuperDrive respectively. In terms of ecology, the company has connected more than 100 upstream and downstream industry partners, including software and hardware Tier 1, ODM, IDH, chips, graphics, sensors, etc. In terms of business model, the company aims to create the most open business model in the industry, providing cooperation models at different levels, from BPU architectures, chips, operating systems to autonomous driving software algorithms and hardware. In terms of joint venture cooperation, in October 2022, Horizon reached a strategic cooperation with Volkswagen. Volkswagen's CARIAD will invest in Horizon and establish a joint venture with the company. In November 2023, the joint venture Core Cheng was formally established, and Volkswagen holds 60% of the shares. In the first half of 2024, the company generated revenue of 0.351 billion yuan by providing automotive solutions to Core, accounting for 37.6% of revenue.

Profit forecasts, valuations, and ratings

The company is forecast to achieve revenue of 2.867/5.105/8.629 billion yuan in 2024/2025/2026, respectively. Based on the closing price of October 25, 2024, PS is 16.6/9.3/5.5 times, respectively. The company's business is similar to companies such as Nvidia, Mobileye, Black Sesame, etc., involving chip design or autonomous driving solutions, so it is set up as a comparable company. As can be seen in the comparison, Horizon 2024-2026 PS is slightly below the average of comparable companies. As an industry leader, the company also rapidly exploded in the smart driving chip market and the trend of domestic substitution was obvious. It gave it 11 times PS in 2025, with a target price of 4.7 HK$4.7, for the first time coverage, and a “gain” rating.

Risk warning

Technological development progress falls short of expectations, market demand falls short of expectations, OEM self-development exceeds expectations, competition intensifies, joint ventures with the public are not operating smoothly, etc.