Broker: UOB Kay Hian
Date of Report: 10 July 2025

Horizon Robotics: Dominating the Autonomous Driving Wave in China’s Booming EV Market

Introduction: Horizon Robotics Takes Center Stage in China’s ADAS Revolution

Horizon Robotics, a leading innovator in advanced driver assistance systems (ADAS) and autonomous driving (AD) solutions, is rapidly emerging as a dominant player in China’s automotive technology sector. With a robust suite of proprietary hardware and software and a client list featuring major Chinese OEMs, Horizon is poised for exponential growth as the market embraces electrification and smart driving technologies. UOB Kay Hian initiates coverage with a BUY rating and a target price of HK\$7.45, implying a 14.8% upside from recent levels.

Company Overview: Technology Powerhouse with Unique Software-Hardware Integration

– **Share Price:** HK\$6.49 – **Target Price:** HK\$7.45 – **Upside:** 14.8% – **Market Cap:** HK\$90,090m (US\$11,550m) – **Shares Outstanding:** 13,881 million – **GICS Sector:** Technology – **Ticker:** 9660 HK – **Major Shareholders:** Dr. Kai Yu (13.0%) – **NAV/Share FY25:** RMB 2.60 – **Net Debt (Cash)/Share FY25:** RMB (3.24)

Investment Highlights: Why Horizon Robotics Stands Out

• Rapid Market Share Expansion: Horizon Robotics is set to capture a 54% ADAS market share among Chinese OEMs by 2027, up from 40% in 2024. This is driven by its comprehensive hardware-software offerings, flexible solutions, and highly competitive pricing.
• High-Performance, Energy-Efficient Solutions: The company’s proprietary Brain Processing Unit (BPU) delivers industry-leading low-power, high-throughput AI processing tailored for autonomous driving, outperforming global peers like Nvidia and Black Sesame in both efficiency and cost-effectiveness.
• Beneficiary of Chip Localisation: With China targeting a 25% self-sufficiency rate in automotive chips by 2025 amid US restrictions, Horizon’s local expertise and established clientele make it a prime beneficiary of this push.
• Mass-Market EV Penetration: Horizon’s Journey solutions are already deployed in over 1 million BYD vehicles and are expanding into EVs priced between RMB 100,000–200,000, a segment that accounts for 38.5% of China’s total EV market.

Key Financials: Rapid Growth Trajectory

Growth Drivers: New Products and Market Trends

• Journey 6P Launch: Horizon’s latest high-compute hardware, Journey 6P (560 TOPS), is slated for launch in 2H25. Initially to be deployed in Chery vehicles in 3Q25, mass production is expected in 2026. Forecasted shipments for Journey 6P are 30,000 units in 2025, 250,000 in 2026, and 800,000 in 2027—equating to 0.8%, 4.2%, and 10% of total shipments, respectively.
• Projected Revenue Growth: Revenue is expected to grow by 47.6% in 2025, 79.3% in 2026, and 47.7% in 2027, reaching RMB 9.3 billion in 2027, driven by greater hardware shipments, higher ASPs, and ADAS adoption in lower-priced vehicles.
• Gross Margin Trends: Blended gross margin is projected to decrease from 77.3% in 2024 to 69.1% in 2025, 62.5% in 2026, and 61.1% in 2027. This reflects higher revenue contribution from lower-margin hardware.
• Profitability Outlook: Operating losses are expected to narrow from RMB 3.1 billion in 2025 to RMB 926 million in 2027, with breakeven and a projected net profit of RMB 1.2 billion anticipated in 2028.

Peer Comparison: Standing Out in a Competitive Field

Peer Analysis: Horizon trades at a premium to its HK-listed peers but at a discount to US-listed giants, justified by its rapid growth, market share gains, and margin trajectory.

Revenue and Profit Breakdown by Category

• By 2027, product solutions are projected to contribute 78.5% of total revenue, up from 32.6% in 2023, as hardware sales outpace services and non-automotive segments.
• Gross margins for product solutions are set to rise steadily, while license and services margins remain an impressive 90% throughout the forecast period.

Profitability and Leverage Metrics

• Gross margin expected to decline from 77.3% in 2024 to 61.1% in 2027, reflecting hardware-heavy sales mix.
• Operating margin to improve from (99.1%) in 2024 to (9.9%) in 2027 as scale drives expense optimization.
• Net margin moves from 98.4% in 2024 (due to non-operating income) to (6.4%) in 2027, with breakeven forecast in 2028.
• Strong net cash position relative to equity throughout the period, supporting R&D and expansion.

Risk Factors and Earnings Sensitivity

– Revenue forecasts assume robust ADAS/AD penetration, especially in lower-priced vehicles. – Gross margin sensitivity to hardware mix; increasing hardware share may pressure overall margin. – US chip supply restrictions and broader geopolitical risks could impact supply chain, but Horizon is well-placed given China’s localisation drive. – Breakeven depends on continued revenue growth and cost control.

Conclusion: BUY Recommendation on Unmatched Growth Prospects

Horizon Robotics is strategically positioned to dominate the ADAS and autonomous driving market in China, supported by strong partnerships, a versatile technology portfolio, and the ongoing shift toward domestic chip solutions. With significant revenue and market share growth projected for the coming years and breakeven on the horizon, Horizon Robotics presents an attractive opportunity for investors seeking exposure to the future of smart mobility in China’s EV market. UOB Kay Hian reiterates a BUY rating and a target price of HK\$7.45, reflecting strong confidence in Horizon’s long-term growth trajectory.