On October 2, Horizon Robotics (hereinafter referred to as "Horizon"), a provider of intelligent driving solutions, submitted its second listing application; On October 8, Horizon passed the hearing of the Hong Kong Stock Exchange. This means that the listing of Horizon Hong Kong stocks has entered the final sprint stage.
Securities Star noted that although Horizon has achieved significant growth in operating income and gross margin in recent years, it has not been able to reverse the profit loss situation so far. On the other hand, Horizon's top five customers account for a high proportion of revenue, especially the cooperation with Volkswagen's CARIAD. However, this customer concentration makes the company's operating performance vulnerable to the influence of individual customers, increasing the operational risk.
In the eyes of industry insiders, if it wants to survive and develop in the future intelligent driving market, Horizon needs to "replenish blood" through continuous financing, which is also the core reason for its plan to go public. However, in the current market environment, there is still a lot of suspense about whether Horizon can achieve the expected financing scale.
Revenue soared, profits continued to lose
According to the prospectus, Horizon is a market-leading provider of advanced assisted driving and advanced autonomous driving solutions for passenger cars, with proprietary software and hardware technologies. The company's solutions integrate algorithms, specialized software and processing hardware to provide core technologies for advanced assistance and advanced autonomous driving, thereby improving the safety and experience of drivers and passengers.
Since the mass production of solutions in 2021, Horizon is the first and the largest Chinese company to provide advanced driver assistance and advanced autonomous driving solutions in front of mass production in terms of total installed base of solutions.
In terms of total installed base of solutions in 2023 and the first half of 2024, Horizon ranks fourth among all global advanced driver assistance and advanced autonomous driving solution providers in China, with market shares of 9.3% and 15.4%, respectively.
According to the prospectus, from 2021 to 2023, Horizon's revenue will be 467 million yuan, 906 million yuan, and 1.552 billion yuan respectively, showing a year-on-year growth trend. In terms of revenue structure, automotive solutions are the revenue pillar of Horizon, and the proportion of total revenue of this business from 2021 to 2023 has increased year by year, reaching 87.9%, 88.5% and 94.8% respectively.
In the prospectus, Horizon attributed the significant increase in revenue of automotive solutions to four main aspects: the rapid development and strong growth of the downstream smart car market, which drove the demand for automotive solutions; an increase in the customer base and increased spending on the product solutions business by existing customers; The increasing penetration of advanced autonomous driving solutions is driving the increase in the value of each vehicle and the increasing demand from OEMs and Tier 1 suppliers for the licensing of algorithms, various development tools and technical services for the design and customization of advanced driver assistance and advanced autonomous driving solutions.
From the perspective of disassembly, Horizon's automotive solutions are divided into two business lines, namely "product solutions" and "licensing and services". Among them, the licensing and service business accounts for an increasing proportion of revenue, exceeding 62% in 2023. The proportion of product solution revenue has a downward trend, from 44.6% in 2021 to 32.7% in 2023.
In the first half of this year, Horizon's revenue continued to grow, achieving revenue of 935 million yuan, of which the proportion of automotive solutions revenue further increased to 97.7%.
While revenue increased, Horizon's gross profit margin also maintained a high level. The gross profit margin for the past three years was 70.9%, 69.3% and 70.5%; In the first half of this year, the gross profit margin increased significantly, reaching 79%.
Securities Star noted that despite the soaring revenue of Horizon and the high level of gross profit margin, the company has not yet come out of the quagmire of losses. According to the prospectus, from 2021 to 2023, Horizon will incur annual losses of 2.064 billion yuan, 8.72 billion yuan and 6.739 billion yuan respectively. In the first half of this year, Horizon had a net loss of 5.098 billion yuan.
Excluding changes in the fair value of share-based payments, preferred shares and other financial liabilities, the company's adjusted net loss from 2021 to 2023 and the first half of 2024 was 1.103 billion yuan, 1.891 billion yuan, 1.635 billion yuan and 804 million yuan, respectively. As for the reason for the loss, Horizon said in the prospectus that it was mainly due to the continued high investment in research and development.
Horizon mentioned that the company's R&D expenses are expected to remain at a high level in the future, and it plans to break even and achieve profitability by expanding revenue scale and maintaining gross profit margin. But continued R&D investment continues to eat into profits, which also means that Horizon is still hopeless to be profitable in the short term.
Suffering from large customer dependence
According to the prospectus, as a second-tier supplier, Horizon directly cooperates with OEMs, and also cooperates with OEMs through first-tier suppliers
to install advanced driver assistance and advanced autonomous driving solutions that integrate software and hardware into mass-produced vehicles. At present, Horizon's software and hardware integration solution has been adopted by 27 OEMs (42 OEM brands) and equipped with more than 285 models.
According to Horizon, the top 10 Chinese OEMs have already chosen our solution for the mass production of their passenger models. In 2023 alone, more than 100 new models have been designated.
According to the prospectus, Horizon's main customers include SAIC, GAC Group, BYD, Ideal, NIO, etc. Among them, Horizon is BYD's largest supplier of intelligent driving chips, and it is also the largest and most important supplier of intelligent driving chips of Li Auto.
Securities Star notes that Horizon is at risk of relying on large clients. According to the prospectus, in 2021, 2022, 2023 and the first half of this year, the total revenue generated by Horizon's five major customers will be 283 million yuan, 482 million yuan, 1.067 billion yuan and 727 million yuan respectively, accounting for 60.7%, 53.2%, 68.8% and 77.9% of the revenue, respectively. During the same period, revenue from the largest customers was shared
Respectively they amounted to MOP 115 million, MOP 145 million, MOP 627 million and MOP 352 million, accounting for 24.7%, 16%, 40.4% and 37.6% of the revenue respectively.
It's just that Horizon's top five customers are frequently changing. According to relevant reports, from 2021 to 2022, Li Auto will be the largest customer of Horizon; In 2023, Core Cheng Beijing Technology Co., Ltd. (hereinafter referred to as "Core Cheng"), a joint venture between Horizon and Volkswagen, will become the company's largest customer, and Li Auto will take a back seat. In 2023, Core Cheng will bring 630 million yuan of revenue to Horizon, which accounts for 40.4% of Horizon's total revenue that year.
It is understood that Core Cheng is mainly engaged in the research and development and manufacturing of autonomous driving application software and automatic driving systems, and will mainly serve the Volkswagen Group in the short term, and its products will be applied to Volkswagen models sold in the Chinese market. Horizon and Volkswagen each own 40% and 60% of the shares of Core Cheng. Starting from 2023, Horizon will license algorithms and software related to advanced driver assistance and autonomous driving solutions to Core Journey. In the first half of this year, Horizon obtained 351 million yuan in licensing revenue from Core Cheng, accounting for 37.6% of total revenue.
It is also reported that among the top five customers in the first half of this year, NavInfo became the second largest customer, while Li Auto, Foretek and BYD were its third, fourth and fifth largest customers, respectively. The change of major customers has, to a certain extent, brought uncertainties to whether Horizon can continue to grow steadily.
Horizon said that the current customer concentration is high, and although the number of customers is expanding, it is expected that the concentration will decrease as the number of customers increases, but there is still a risk of customer concentration. (This article debuted Securities Star, author|Liu Fengru)
Source: Securities Star