To The Moon

On February 9, $Hesai Group(HSAI)$ landed on NASDAQ, becoming the "China‘s No. 1 Lidar stock". Hesai Tech's market value exceeded $2.3 billion on its debut day, making it global lidar king in terms of market cap.

Founded in 2014, Hesai Tech was mainly engaged in the business of laser telemetry for drones and detection of methane and other dangerous gases for factories in the early years, and then switched to the automotive lidar.

In 2022, the company ranked first in the world in terms of shipments, taking 60% of the market share. Since its inception, it has cumulatively sold 100,000 units in the automotive lidar market and is the first lidar company in the world to sell more than 10,000 units per month.

High unit price of automotive lidar

Automotive lidar is an important sensor for autonomous driving systems, which can determine the distance and shape of objects by emitting laser beams and receiving the reflected laser beams back.

Because of the high cost, $Tesla Motors(TSLA)$ did not choose lidar, but a low cost camera. Musk believes that the camera is the closest to the human vision during driving, in line with the "first principles" of the program, and said that only a fool will use lidar.

According to Hesai Tech's prospectus, the average price of a single lidar device in 2019 was $17,400. It was indeed expensive for consumers.

In 2022, the average selling price of a Hesai Tech lidar unit dropped to $3,100, which was still much higher than a camera, but not unaffordable.

High growth potential by supplying China's reknown car companies

In 2021, $XPeng Inc.(XPEV)$ is the first to use lidar in mass production on the P5 model. Subsequently, Chinese car companies such as $NIO Inc.(NIO)$ and $Li Auto(LI)$ also joined the lidar group.

Hesai Tech was favored by Li Auto, whose L9 models were equipped with lidar as standard across the lineup. With L8 and L7 coming to market, Hesai Tech's shipment volume has been significantly increased.

According to the prospectus, Hesai Tech's lidar has been ordered by 10 mainstream passenger car manufacturers, such as Li Auto, Changan Auto and SAIC, for a total of millions of units in mass production.

Currently, Hesai Tech's production line can support an annual production capacity of 3.5 million units of non-AT series lidar products and about 20,000 units of AT series lidar products per month. Hesai Tech's production capacity will increase to 1.2 million units when the new plant comes into operation in 2023.

According to Frost & Sullivan,

the market for lidar in assisted driving is expected to be $12.9 billion in 2026 and $64.9 billion in 2030, representing a 232-fold increase from 2022.

Lidar can also be used for self-driving cabs, trucks, delivery robots, etc. The total market size is expected to reach $103.9 billion in 2030.

In terms of financial data, Hesai Tech's revenue for the first nine months of 2022 was RMB793 million, up 72.8% from the same period in 2021.

While Hesai Tech has delivered more than 100,000 units since its inception, more than 80,000 units were delivered in 2022. Of the deliveries, 62,000 units of the solid-state LiDAR AT128, which began delivery in the second half of last year alone.

Hesai Tech is not only in a prime track, but it also has high growth potential. Coincidentally, Hesai is also the king of global lidar. Such a high quality target that combines growth and industry topography is rare in the capital market.

According to CITIC Securities' research report,

the global passenger car lidar shipments will be about 150,000 units in 2022 and are expected to reach 500,000 units in 2023.

Risk Alert

Of course, Hesai Tech also has hidden worries.

The first and foremost is the price war of new energy vehicles. The major car companies will inevitably compress the price of suppliers. For example, Hesai Tech's gross margin has been declining year after year, from 70.4% in 2019 to 44% in the first nine months of 2022.

In its prospectus, Hesai Tech expects gross margins to continue to decline in the fourth quarter of 2022.

In addition, Hesai Tech is faced with multiple competitors, such as robosense secured fixed-point project orders of BYD Denza N7 and YangWang U8, and got BYD's strategic stake; Tudatone cooperated with Nio; Huawei and DJI also joined the competition.

Under the fierce competition, it's uncertain that whether Hesai Tech can maintain the advantage or not.