Everbright Securities has initiated coverage on PATEO (02889), a leading Chinese smart cockpit solutions provider, with a "Buy" rating. The firm highlights PATEO's potential to penetrate overseas OEM supply chains through international clients like Porsche, positioning overseas revenue as a secondary growth driver. Compared to mature automotive supply chain players, PATEO boasts integrated hardware-software advantages and higher revenue growth, leveraging its technological and ecosystem strengths to expand market share.
**Company Overview** Founded in 2009 and listed on the Hong Kong Stock Exchange in September 2025, PATEO ranked third in China's passenger car smart cockpit domain controller market by shipment volume in 2024 (7.3% share) and second in the new energy vehicle segment (13.11% share) from January to May 2025. As one of the few full-stack solution providers capable of mass-producing Qualcomm 8155/8295 and Kirin 9610A+HarmonyOS systems, PATEO serves 29 major OEMs, including domestic leaders like FAW, Dongfeng, SAIC, and international brands such as Porsche. Its domain controllers power flagship models like Changan’s Avatr and Dongfeng’s Voyah.
In 2024, PATEO reported revenue of RMB2.557 billion, with smart cockpit solutions and connectivity services contributing 95.5% and 4.3%, respectively. Revenue reached RMB1.086 billion in H1 2025, maintaining a similar structure (95.7% from smart cockpits), reflecting ongoing optimization.
**Industry Outlook** China’s smart cockpit market is projected to grow from RMB129 billion in 2024 to RMB299.5 billion by 2029 (18.4% CAGR), with penetration reaching 97%. Key trends include: 1. Policy and demand-driven upgrades, with personalized and scenario-based needs accelerating tech iterations. 2. Rapid adoption of domain controllers (44.1% penetration in 2024, expected to exceed 90% by 2029), the "brain" of smart cockpits. 3. Dual-track tech advancements: AI models enhancing domain controllers (addressing latency, privacy, and offline service issues) and integrated cockpit-chassis solutions reducing hardware redundancy for cost efficiency.
**Competitive Edge** PATEO’s 2024 gross profit rose 30.3% YoY to RMB301 million, supported by: 1. **Full-stack R&D**: Proprietary "software-hardware-cloud" solutions enable customized offerings. With 6,000+ patents (80% invention) and RMB700+ million R&D spend (2022–2024), its 709-member tech team drives innovation. 2. **Premium products**: Leads in high-end smart cockpit solutions using Qualcomm 8295 chips and secured mass production contracts for next-gen Snapdragon 8397 platforms. As a key HarmonyOS supplier, PATEO stands to benefit from Huawei’s "Harmony Intelligent Drive" model ramp-up in 2026–2027. 3. **Ecosystem synergy**: Strategic shareholders like Tianjin Jinmi (backed by Xiaomi, 5.17% stake) and Guangzhou Ping An (3.89%) foster "OEM orders + ecosystem resources + financial support" collaboration.
**Valuation & Risks** Everbright forecasts 2025–2027 revenue of RMB3.584 billion (+40% YoY), RMB5.664 billion (+58%), and RMB8.761 billion (+55%), with PS ratios of 7.5x, 4.7x, and 3.1x—above peers’ averages. The premium reflects: 1. Partnerships with Qualcomm and Huawei, third-ranked domestic market share, and entry into top NEV supply chains. 2. Integrated solutions and high growth versus traditional suppliers. 3. Overseas expansion potential via clients like Porsche.
*Risks*: Weak smart cockpit demand, slower tech iterations, supply chain disruptions, and post-IPO volatility.
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