MX will accelerate ADAS lidar expansion into the sinking market and become the main driver of the company's growth in 2025.

The robotics business is expected to become the second growth curve for the lidar business, and the company expects to ship 100,000 units by 2025.

The “Buy” rating was reconfirmed, and the target price was adjusted to HK$38.18.

MX products have penetrated the sinking market, and new models will be the main incremental contributor: after Sagiteng Juchuang released the new LiDAR MX with a price of less than 200 US dollars in the first half of the year, the company said at the performance conference that it had successfully obtained targeted cooperation from 7 automakers by the end of November. We expect the launch of MX products to accelerate the trend of 0.15 million to 0.2 million yuan smart cars equipped with lidar. According to statistics from the Geshe Automobile Research Institute, the number of lidars installed surpassed 1 million from January to October 2024, with Sagitengjuchuang leading the list with 401,940. Meanwhile, according to the Passenger Federation data, domestic retail sales of new energy vehicles during the same period were 8.331 million units, indicating that the lidar penetration rate was 12.0%, and there is still plenty of room for growth in the future. According to the results conference, the main ADAS lidar shipping customers of Sagiteng Juchuang currently include Xiaopeng, Wenjie, ZEEKR, and BYD (Look Up) models. In addition, many newly released models have also begun to be equipped with Sagiteng Juchuang's lidar, including the 2025 BYD Han and Seal, Hongqi Guoya, etc. We believe that the new models will be the main driving force for Sagiteng Juchuang's ADAS lidar next year.

The robotics business is expected to start a second growth curve: in addition to the automotive ADAS field, Sagiteng Juchuang's lidar will continue to expand more market space in the field of robots and drones. In terms of products, the company mainly relies on the E platform built in 2021 to generate all-solid-state wide-angle lidars covering both the automotive and intelligent robotics fields. According to the company, as of November 2024, Sagiteng Juchuang has more than 2,600 partners in the field of robotics. The company expects lidar shipments in the robotics sector to exceed 100,000 units in 2025. Currently, physical intelligence is in the early stages of rapid development, and we believe that demand for various sensors, including lidar, is expected to grow rapidly in the future.

Reiterate the “buy” rating and adjust the target price to HK$38.18: According to the company's disclosure, Sagiteng Juchuang sold a total of 0.3819 million lidars in the first three quarters of 2024, of which 0.1385 million were sold in 3Q24. In the year-end promotion phase, we expect 4Q24 sales to further increase month-on-month to 0.208 million units, so we expect annual sales to be close to 0.59 million units (up 127.2% year over year). We forecast that in 2025/26, Sagiteng Juchuang's lidar sales volume will be 0.852 million/ 1.025 million units. In terms of unit price, the company's management stated at the 3Q24 results meeting that MX radar sales may account for about 1/3 of total annual sales in 2025. As a result, we expect the average price of lidar sales to drop to around 2,000 yuan in 2025 (currently 2,500 yuan), and further drop to 1,800 yuan in 2026. Accordingly, we lowered our revenue and profit forecasts for 2024-26, respectively, and we expect Sagiteng Juchuang to improve net profit before the adjustment in 2026. Valuation: We adjusted Sagiteng Juchuang's valuation benchmark to 2025 and used 7 times P/S for valuation. We obtained the latest target price of HK$38.18, reaffirming the “buy” rating.

Risk warning: Demand for new energy vehicles fell short of expectations; the number of lidars used in ADAS and other products decreased; market competition intensified; overseas market expansion fell short of expectations.