The Hong Kong stock market is expected to welcome another special technology company.

According to Zhixun Finance APP, on November 7, the Hong Kong Stock Exchange disclosed that Hidi Asia Vets (Hunan) Co., Ltd. (referred to as 'Hidi Asia Vets') has submitted an application for listing on the main board of the Hong Kong Stock Exchange, with China International Capital Corporation, China Securities Co.,Ltd. International, and Ping An Insurance Capital (Hong Kong) as its joint sponsors.

It is reported that Hidi Asia Vets was co-founded by Li Zexiang and Ma Wei, with the former being known as the 'Godfather of DJI.' In addition to Hidi Asia Vets, Li Zexiang has also been involved in the founding of more than 60 technology companies including GuGao Technology, DJI Innovations, and Yunjing Intelligent, of which GuGao Technology was listed on the GEM of the A-share market in 2023.

Unlike GuGao Technology, which has already achieved profitability, Hidi Asia Vets remains in a long-term loss 'quagmire,' which has raised doubts from the outside world about the company's sustainable development and profit capabilities. How Hidi Asia Vets can create good investment returns for secondary investors still needs to be verified over a long period of time.

Supplier of self-driving technology for commercial vehicles

The prospectus shows that Hidi Asia Vets is a leading supplier of self-driving technology for commercial vehicles in China. The company has developed a variety of products and solutions, including: self-driving technology, providing self-driving mining trucks and logistics vehicles; V2X products and solutions for intelligent transportation and smart cities; high-performance perception solutions, applying self-driving technology to rail transportation and commercial vehicles.

According to information from Zhuoshi Consulting, Hidi Asia Vets is the only top self-driving company in China that has commercialized solutions in closed environments, city roads, and intercity roads, and it is also one of the first self-driving companies in China to launch commercial V2X products. All of the company's products and solutions fall within the sector of specialized technology industries defined under Chapter 18C of the listing rules, including electric and self-driving automobiles under advanced software and hardware, as well as advanced transportation technology.

In terms of product sales, HeiDi Smart Driving has delivered 56 self-driving mining trucks to a certain mining area in China, operating in a mixed mode with about 500 manned trucks, forming the world's largest mixed-operation mining fleet. They have delivered China's first completely unmanned electric mining fleet.

HeiDi Smart Driving's pioneering full-stack self-driving mining truck solution, "Element Mine," integrates the company's proprietary algorithms with widely used commercial vehicle self-driving hardware to achieve autonomous operation and remote monitoring of self-driving mining trucks, thereby automating labor-intensive mining operations.

Under pressure from gross margin and high expenses, the performance has been in continuous losses.

Zhitong Finance and Economics APP noted that HeiDi Smart Driving has taken a leading position in the field of commercial vehicle self-driving, but the company has not yet achieved profitability.

In the first half of 2021, 2022, 2023, and 2024, HeiDi Smart Driving achieved revenues of approximately 0.077 billion yuan (RMB, the same below), 0.031 billion yuan, 0.133 billion yuan, and 0.258 billion yuan respectively; while in the same period, it incurred losses of approximately 0.18 billion yuan, 0.263 billion yuan, 0.255 billion yuan, and 0.123 billion yuan.

HeiDi Smart Driving's net losses are mainly due to the significant sales costs, general and administrative expenses, and research and development expenses incurred during the previous performance period. In the first half of 2024, these three expenses accounted for 44.5% of the revenue. Zhitong Finance and Economics APP noted that the performance under pressure of the gross margin is also one of the reasons why HeiDi Smart Driving has not yet been profitable. The company's gross margin reached 33.1% in 2021 but has since shown a fluctuating downward trend.

From an industry perspective, one of the reasons for HeiDi Smart Driving's past profit pressure is that the market for self-driving commercial vehicles is in its nascent stage, with intense industry competition.

According to the Burning Insight report, in 2023, the global market size for self-driving commercial vehicles was only 5.9 billion yuan, with China's market size at 2.4 billion yuan. Regarding competition, in the first half of 2024, among the top 5 companies in China's self-driving commercial vehicle market, the largest company held a 12.9% share, while the shares of the second to fifth places ranged between 6.7% and 8.2%.

In the intense competition, HiDi Self-Driving Cars may continue to face multiple tests, including: developing new technologies, enhancing customer experience, establishing effective commercialization strategies, developing new products and solutions, and successfully maintaining and acquiring new customers. HiDi Technology pointed out in the prospectus that if the company fails to compete successfully, or if the company needs to take costly actions to respond to competitors' actions to compete successfully, the company's business, operational performance, and financial condition may be significantly adversely affected.

The self-driving commercial vehicle industry is expected to experience rapid growth.

In the long term, according to the Zhaoshi Consulting report, the global self-driving commercial vehicle market is expected to accelerate growth in the coming years, and HiDi Self-Driving Cars is expected to achieve rapid growth in this process.

The report shows that the global self-driving commercial vehicle market is projected to reach 1615.8 billion yuan by 2030, with a compound annual growth rate of 123.0% from 2023 to 2030. In the Chinese market, with gradual policy openness and continuous improvement in self-driving technology, the future market size will experience explosive growth, reaching an estimated 778.8 billion yuan by 2030.

As the scene where self-driving technology is first implemented, closed scenes accounted for approximately 53.7% of the global self-driving commercial vehicle market size in 2023, much higher than city roads and intercity mainline scenes. At the same time, driven by the increasing demand for self-driving solutions, the Middle East, Australia, and South America have become strategic markets for commercial vehicle self-driving, which will play a key role in driving the expansion of the global market in the coming years.

In this context, HiDi Self-Driving Cars hopes to seize market opportunities through multiple channels. The company plans to use the funds raised from the IPO for research and development, enhancing commercial capabilities, industry chain integration, and international layout, among many other aspects. In terms of research and development, the company's future five-year R&D includes the construction of the next-generation self-driving platform R&D team, the integration of hardware, software, and algorithms for the next-generation self-driving platform, upgrading the V2X (vehicle networking) and high-performance perception system R&D team, upgrading research and development equipment, and more. In terms of international layout, the company will promote the overseas commercialization of self-driving mine trucks to Australia, Europe, and South America, and cooperate with projects such as the NEOM new city in Saudi Arabia to launch the flagship product CiDiTruck, gradually expanding its overseas influence.

According to Zhitong Finance and Economics APP, with the continuous maturation of technology and the increasing market demand, the application potential of self-driving in the commercial vehicle field is enormous. HiDi Self-Driving Cars has successfully commercialized self-driving mine trucks in multiple mining areas and has received a large number of orders, laying the foundation for its future revenue growth.

However, during the rapid growth of the industry, it may attract a large amount of capital inflow, and fierce market competition may force participants to lower prices to attract customers. Price wars among companies may intensify. In addition, rapid iterations of self-driving technology require companies to continuously update and optimize products to meet market demands, which may further compress profit margins. Therefore, despite the significant revenue growth of HiDi Intelligence, it is crucial to observe whether the company can balance revenue, costs, and profits in the future.