Initiate coverage of Black Sesame Technology (“Black Sesame” or the “Company”) with "Buy" and a TP of HK$23.61. Black Sesame, as one of the leading domestic assisted driving SoC chipset designers in China, is in the process of entrenching itself within the OEM ecosystem through attaining vehicle designations for its C1200 series chipsets, and beginning the production process for its next generation A2000 chipsets. As a result, we believe that the Company’s revenue prospects are excellent. We forecast 2025-2027 revenue at RMB736.4 mn/ RMB1,611.2 mn/ RMB2,035.5 mn respectively, representing YoY growth of 55.3%/ 118.8%/ 26.3%. We base our target price on a 2026 EV/Sales ratio of 8.0x, with reference to comparable peers.
Currently, the Company is facing high costs related to the research of semiconductors, but also has excellent operating leverage. Revenue growth is contingent on three business developments: 1) the success of the C1200 series in expanding into the integrated cockpit and ADAS market in the short term; 2) the ability to quickly mass produce and obtain design wins for the 125-1000 TOPS A2000 series, allowing for revenue growth in the medium term; and 3) the ability for the Company to continue to improve its process to 5-3 nm for its next generation SoCs expected to be mass produced in 2028, allowing for sustained revenue. We believe that business developments 1) and 2) are very likely given its high product quality and the strong relationships with customers.
Near term, we project the C1200 series to gain significant market share in the sizable cockpit domain controller (“CDC”) market due to it being one of the only domestic alternatives to Qualcomm’s SA8775p. We project the market to expand to between RMB5.4 bn-RMB11.0 bn by 2026, with sales volume growing by 80% in 2025. Black Sesame offers itself as a geopolitically safe alternative to Qualcomm, and is likely to significantly gain in market share if it price its C1200 series chip correctly with regards to the relative performance difference. For the medium term, if the Company is able to gain significant numbers of vehicle mode
designations for its A2000 series over the course of 2025, it would allow for a significant gain in volume, ASP, and GM for the year of 2026. We believe that this is likely because: 1) the Company currently is in contact with various OEMs to achieve vehicle designations; 2) the Company’s A2000 series has high raw INT8 TOPS compared to its domestic competitors; and 3) most OEMs prefer to use the self-driving algorithm of their choice, with this option being preferable to Horizon’s SoC + algorithm solution, which locks the assisted driving algorithm provider as Horizon.
Catalysts for investment: 1) announcement of design wins for the A2000 chipset; 2) figures proving the success of the C1200 series as released by the Company.
Risks: 1) OEM consolidation allowing for in house ADAS SoCs; 2) trade friction preventing the Company from accessing the services of offshore EDA and fabrication companies; 3) delays in the production of latest chipsets.