Produced by | Bullet Finance

Art Editor | Qian Qian

Reviewed by | Song Wen

In the automotive industry, there is a saying: electrification is only the first half, and intelligence is the second half.

Under this prophecy, the investment logic of the market is also changing. In the era of electrification, investors paid more attention to core enterprises in the new energy vehicle supply chain, such as battery suppliers and powertrain suppliers. For example, when Contemporary Amperex Technology Co., Limited (CATL) was listed on the ChiNext board of the Shenzhen Stock Exchange in 2018, its issue price per share was 25.14 yuan; today, its share price has increased nearly tenfold, with a market value exceeding one trillion yuan.

In the era of intelligent driving, it is the turn of intelligent driving chip and system solution providers to hold sway in the market. Based on this, Horizon Robotics (Horizon Robotics-W, stock code: 9660.HK), which was recently listed on the Hong Kong Stock Exchange, has been crowned as "the best IPO in Hong Kong this year," arousing high expectations in the market.

So, what is Horizon Robotics' true value in the era of intelligence? Can it become the "CATL" of the second half, recreating a myth of soaring stock prices?

1. A Star Favored by Capital

From submitting its listing application to the Hong Kong Stock Exchange on March 26 this year to ringing the bell on October 24, Horizon Robotics successfully completed its IPO in less than seven months, seemingly catching a fast train.

However, in fact, this is not the first time the market has responded enthusiastically to it. Since its establishment in 2015, Horizon Robotics has garnered the favor of many renowned investment institutions and industrial capital.

Volkswagen, SAIC Motor, GAC Capital, Great Wall Motor, Chery Automobile, FAW Group, BYD, CATL, and many other automotive companies and upstream and downstream enterprises in the industrial chain, as well as renowned financial institutions such as Matrix Partners China, Hillhouse Capital, Yunfeng Capital, and Harvest Global Investments, have all favored and continuously invested in Horizon Robotics. According to media reports, Horizon Robotics has completed 11 rounds of financing, raising a cumulative amount exceeding US$3.4 billion (approximately RMB 24.1 billion).

It is worth mentioning that before this IPO, four institutions, namely Alibaba, Baidu, DHL Express, and Ningbo State-owned Capital Fund, jointly subscribed to US$220 million (approximately RMB 1.564 billion) worth of Horizon Robotics shares as cornerstone investors.

The support of numerous renowned investment institutions has validated Horizon Robotics' reputation as "the best IPO in Hong Kong this year." As the adage goes in the market, the essence of capital is profit-seeking, and it always flows to where the highest returns are. This is also true for Horizon Robotics, where capital favors it primarily because of its deep roots and significant achievements in the intelligent industry.

In Volkswagen's press release announcing its investment in Horizon Robotics, the latter was hailed as a "leading enterprise in high-performance intelligent driving technology." Herbert Diess, Chairman of the Board of Management and CEO of Volkswagen AG, stated that autonomous driving technology would become a decisive competitive factor in the mobility industry by 2030, which was one of the reasons for choosing to invest in and cooperate with Horizon Robotics.

Horizon Robotics' impressive performance may also be a reason for capital's favor. Reviewing its data from recent years, it can be seen that Horizon Robotics has consistently maintained high revenue, high growth, and stable gross margin financial performance.

In terms of revenue, the company recorded revenues of RMB 467 million, RMB 906 million, and RMB 1.552 billion in 2021, 2022, and 2023, respectively, with a compound annual growth rate of 82.3% from 2021 to 2023. In the first half of 2024, Horizon Robotics' revenue reached a new high of RMB 935 million, surpassing its full-year revenue in 2022 and increasing by 151.6% year-on-year.

In terms of gross margin, Horizon Robotics' gross margin increased from RMB 331 million in 2021 to RMB 628 million in 2022 and further to RMB 1.094 billion in 2023, with gross margins of 70.9%, 69.3%, and 70.5% for these three years, respectively. In the first half of 2024, its gross margin soared to RMB 739 million, an increase of 225.99% year-on-year, surpassing its full-year gross margin in 2022, and the gross margin rose to 79.0%.

As we all know, gross margin directly reflects a company's profitability and is a key indicator for measuring a company's pricing strategy, cost control, and operational efficiency. The increase in Horizon Robotics' gross margin is a powerful testament to the high quality of its development.

2. The King of the Upstream Industrial Chain

Of course, favorable capital conditions reflect a company's market recognition, but to delve into its future prospects, one must explore the company's underlying nature. The crux of why Horizon Robotics is "valuable" lies in its position and role.

Over the years, the intelligent driving industry chain has gradually matured, with the service market, vehicle manufacturers, tier-one suppliers, tier-two suppliers, and other upstream raw material and equipment suppliers forming a competitive and cooperative industrial chain ecosystem. However, unlike the traditional automotive industry, the upstream of this industrial chain is no longer defined as automakers but rather enterprises that hold core chips and software algorithms, as they are the ones that truly determine the iteration and development of industrial technology.

Horizon Robotics' core value lies here. It has long played the role of the king of the upstream industrial chain, not only being the first and largest Chinese company to provide pre-installed mass-produced Advanced Driver Assistance Systems (ADAS) and Autonomous Driving (AD) solutions annually but also being the first choice of over 40 global automakers and brands and China's top 10 automakers as a partner.

In the Chinese automotive market, Horizon Robotics is the fastest in mass production, with the broadest range of brands and models for intelligent driving chips and system solutions. It has achieved the largest-scale mass production for four consecutive years, shipping 6 million units and securing 290 fixed-point models. To date, Horizon Robotics has collaborated with a total of 152 models to achieve SOP (Start of Production).

It can be said that Horizon Robotics has consistently been the industry leader in terms of both the number of fixed-point models and overall shipments. In addition to its key position in the industrial chain and mass production achievements, Horizon Robotics has another decisive advantage over its competitors: "full-level intelligent driving." According to the latest share ranking of full-level intelligent driving computing solutions released by Gao Gong Intelligent Automobile Research Institute, in the first half of 2024, among the on-board solutions for self-owned brand passenger vehicles in the Chinese market, Horizon Robotics ranked first with a market share of 28.65% based on its Journey® 2/3/5 computing solutions (covering low, medium, and high-level full-scenario intelligent driving mass production needs), surpassing strong competitors like Mobileye.

Judging from the reputation of many star automakers that have collaborated with Horizon Robotics, the company's firm grasp on the top position is also closely related to its open and humble cooperation attitude. "Having the aura of a king but not being domineering" is the key to its outperforming other foreign giants.

As one of the earliest automakers to invest in Horizon Robotics, BYD participated in Horizon Robotics' Series C funding round as early as February 2021 and collaborated with it on intelligent driving, algorithms, and other aspects in terms of intelligence. Horizon Robotics has not let down this industry leader in electrification, contributing to BYD's peak performance in the era of intelligence.

In the second half of 2023, the launch of the Tengshi N7 came standard with an integrated driving and parking solution based on a single Journey 3 chip, which was the first in the industry to implement an 8-megapixel front-view camera for intelligent driving computing. In February 2024, the Han EV Glory Edition was launched, with its four-wheel-drive Tian Shen Zhi Yan intelligent driving version equipped with the DiPilot 100 platform, featuring the built-in Horizon Journey 5 chip, supporting high-speed/urban expressway Navigate on Autopilot (NOA) functionality.

In April 2024, BYD Chairman Wang Chuanfu specially attended Horizon Robotics' intelligent driving technology product launch event to lend his support. In his keynote speech, he said, "As early as March 2021, we initiated a strategic cooperation with Horizon Robotics, and today, millions of BYD vehicles are equipped with Horizon's Journey 2, Journey 3, and Journey 5 series chips. We will become Horizon's largest mass production partner."

Wang Chuanfu stated that the first half focused on batteries, while the second half would be about chips. BYD's models will be equipped with the Journey 6 series computing solutions, continuing the strong collaboration with Horizon Robotics to jointly create a safer and more reliable intelligent driving experience for consumers.

3. Winning in Full-scenario Intelligent Driving Mass Production

As soon as the Journey 6 series was introduced, not only did BYD take the lead in embracing it, but other manufacturers also could not sit still.

It is reported that upon the announcement of the Journey 6E/M, initial mass production collaborations were secured with ten automakers and brands, including SAIC Motor, Volkswagen Group, BYD, NIO, GAC Group, SL03, Beijing Automotive Group, Chery Automobile, EXEED, and Voyah, and many Tier 1 hardware and software partners also extended Olive branch to Horizon Robotics.

In the view of Jiemian News·Bullet Finance, the Journey 6 series brings not only orders to Horizon Robotics but also tremendous market opportunities for the intelligent driving market to enter a new era of high-level intelligent driving.

According to data from the China Intelligent and Connected Vehicle Industry Innovation Alliance, in 2023, the market penetration rate of intelligent and connected passenger vehicles with combined assisted driving functions reached 47.3%. From January to June this year, the installation rate of L2 and above assisted driving functions in new energy passenger vehicles reached 66.4%, showing a marked improvement.

For Horizon Robotics, this is undoubtedly a very favorable signal. The Journey 6 series can achieve full coverage of low, medium, and high-level intelligent driving functions for different price ranges of vehicles based on the same architecture computing solution, meeting the loading needs of different vehicle models and avoiding the need for automakers to migrate algorithms between two different hardware platforms, saving them significant hidden development costs.

It is particularly worth mentioning that while the market has already regarded the hardware-software collaboration of urban NOA as a key technology to seize the commanding heights of the market, Horizon Robotics already has a clear first-mover advantage in this area.

Its urban NOA solution, SuperDrive, paired with the Journey 6 flagship edition, can create the best hardware-software integrated high-level intelligent driving system, providing the industry with a benchmark showcase for high-level intelligent driving.

It is understood that the first mass-produced model featuring this solution is scheduled for launch next year, and Horizon Robotics has recently disclosed the road test performance of this product in downtown Beijing and Shanghai, achieving zero takeovers throughout the evening rush hour.

If this urban NOA showroom achieves full-stack openness in its business model and SuperDrive enters mass production, combined with Horizon Robotics' large-scale ecological network, it is not difficult to predict the significant growth potential it will bring to the company.

As Peter Lynch once said, "Behind every stock is a company; look at what it's doing." For Horizon Robotics, what it has been doing has always been future-oriented. While its success stems from a combination of multiple factors such as capital, products, and technology, it is also attributable to countless days and nights of unremitting efforts. It is this relentless dedication that has allowed this company to enter the arena before the Olympic finals of smart cars and secure its place ahead of time.