Why did Hesai achieve designated cooperation with top international car companies and sprint towards global development "acceleration"?

In the capital market, financial reports are usually regarded as the best "touchstone" to test the value of growth stocks.

Taking Hesai (HSAI.US), which just disclosed its financial report for the first quarter of 2024, as an example, the latest financial report has released many signals worth paying attention to. The data shows that during Q1, Hesai's revenue was 360 million yuan (RMB, same below), exceeding the guidance range of 3.2-3.5 billion, maintaining its position in the top tier of global LiDAR manufacturers. While the business continues to develop steadily, the combined gross profit margin of Hesai's Robotaxi business and ADAS business in Q1 was 38.8%, an increase of 0.9 percentage points year-on-year, further strengthening its profitability, far ahead of its peers.

Furthermore, it is worth mentioning that Hesai also revealed at the Q1 financial report meeting that the company expects to achieve profitability in the fourth quarter of 2024.

In addition to the achievements in core financial data, other significant changes in Hesai's first quarter report include the continuous certification of the company's products by downstream customers, and breakthrough progress in global front-loading production cooperation during the period. According to the first quarter report, Hesai reached production cooperation agreements for LiDAR with two international automobile manufacturers ranked in the top ten globally by revenue, including a globally produced model from a top international automotive brand. As of now, among the top 10 international automobile manufacturers with the highest global revenue on the Fortune Global 500 list, Hesai has established production cooperation relationships with 6 of these manufacturers or their joint venture partners.

By taking the lead in breaking through the overseas front-loading production market surrounded by international manufacturers, Hesai may soon accelerate its global development. With a keen eye on the highly potential blue ocean market of global automotive LiDAR, Hesai, which is likely to be the first in the industry to cross the breakeven line, is clearly worth long-term attention from investors.

Achieving Global High-quality Production Points Enhances Performance Certainty

In the past two years, the rapid development of Tesla-led pure visual perception solutions has brought back debates in the capital market regarding the prospects of LiDAR technology routes.

Despite the continuous "noise" in the market, facts always speak louder than words. Looking at the increasing number of car manufacturers that have designated Hesai in recent years, including many top car manufacturers globally, it is evident that the value of LiDAR technology is still underestimated.

Hesai's first quarter report shows that the company has accumulated designations for nearly 70 vehicle models from 18 OEMs and Tier-1 customers in the front-loading production market.

In the domestic market, in addition to deepening its partnership with Li Auto, Hesai has also gained the favor of the newly entered phenomenon-level player, Xiaomi Auto. According to the Xiaomi SU7 new car launch report, the purchase rate of LiDAR is expected to exceed 70%.

With these major clients in the forefront, more car manufacturers that were previously observing have also turned to choose Hesai. It is understood that companies such as Great Wall, Changan, Leapmotor, among others, have recently switched to Hesai's LiDAR. There are also market reports stating that Hesai has entered BYD's supply chain and is expected to accompany the launch of new BYD models later this year Meanwhile, Vesync has also begun to attract high-quality customers in overseas markets. It is understood that in addition to being selected by two global OEMs to provide ADAS LiDAR for their new electric vehicle models, Vesync is also conducting 13 RFI/RFQ with 9 international automotive manufacturers in North America, Europe, and Asia excluding China.

For LiDAR manufacturers, winning more fixed points can only be considered as completing the phase from 0 to 1. The real test of "internal strength" lies in converting fixed points into sufficient orders, and ensuring quality and quantity in production and delivery. In this regard, Vesync is clearly in a leading position in the industry.

Data shows that in Q1 of this year, Vesync's LiDAR product delivery reached 59,101 units, compared to 34,834 units in the same period last year, and only 6,926 units in the first quarter of 2022. Among these, the volume of ADAS LiDAR is evidently the biggest contributor. During the periods of Q1 2022, Q1 2023, and Q1 2024, Vesync delivered 222 units, 28,195 units, and 52,462 units of ADAS LiDAR respectively, maintaining a high growth trend.

Given that Vesync is becoming the core supplier for more and more leading automotive companies, it can be expected that the company's LiDAR shipment volume will continue to maintain a high growth trend in the coming years.

Heavyweight New Product ATX Series Expected to Bring Incremental Volume

In the rapidly advancing field of high-level intelligent driving perception, efficiency is undoubtedly the focus of competition among major enterprises. Whether it is developing new products or quickly achieving mass production and delivery after new technologies are implemented, efficiency is one of the decisive factors determining the success or failure of a company. In the words of Vesync CEO Li Yifan, "This is a game of speed."

With its outstanding design and independent manufacturing capabilities of self-developed LiDAR-specific ASIC, Vesync has always maintained industry-leading research and manufacturing efficiency. The latest case is the launch of the compact high-performance long-range LiDAR ATX at this year's Beijing Auto Show.

It is reported that the ATX is equipped with a fourth-generation chip architecture, which comprehensively upgrades the optical design and laser transceiver module. Compared to Vesync's previous flagship product AT128, this product has reduced its volume by 60% and weight by 50%. More importantly, while achieving a smaller size, the core performance of this product has been comprehensively upgraded. Not only can it detect distances up to 300 meters, but it also provides a 140° ultra-wide horizontal field of view through 7x optical zoom, helping intelligent vehicles timely perceive complex road conditions on both sides, such as emergency merging vehicles, pedestrians, or non-motorized vehicles crossing, effectively enhancing the safety of urban assisted driving. In addition, ATX is equipped with the world's first intelligent point cloud analysis engine, which can filter out 99.9% of noise in rainy and foggy environments.

In addition to having stronger performance and quality, ATX also carries the "DNA" of ultimate cost-effectiveness. It is understood that under the ASIC architecture, 70% of the components and parts of Vesync's AT and ET product series are shareable, effectively reducing supply chain management costs. For automotive companies, more controllable component costs also mean that the penetration of intelligent driving into the consumer price range of 150,000 yuan and below has become possible As of now, ATX has secured designated mass production projects from 4 leading global and domestic OEMs, with large-scale production expected to begin in the first quarter of 2025. It is anticipated that with comprehensive advantages in performance, quality, and cost, the ATX series is poised to ramp up in 2026 and become the main force in ADAS radar shipments.

Finally, looking back at Hesai's first-quarter report, in the fiercely competitive LiDAR market, Hesai has achieved a balance between steady growth in scale and optimization of profitability. Given the company's successive wins of high-quality projects at home and abroad, as well as the launch of more competitive LiDAR products, it is foreseeable that Hesai's performance certainty will continue to rise, and the company's self-"hematopoietic" ability will be further strengthened after crossing the breakeven point