We maintain "Buy", and increase TP to HK24.50. Black Sesame (the “Company”), posted strong revenue growth in 2025H1 that slightly exceeded our projections, however gross margin declined faster than our projections due to a greater proportion of revenue coming from lower gross margin hardware products. Due to the strong revenue growth, we increase our 2025-2027 revenue forecasts to RMB774 mn (+5.1%) / RMB1,659 mn (+3.0%) / RMB2,044 mn (+0.4%), respectively. We maintain our 2026F EV/S multiple at 8.0x, as we remain bullish on the Company’s delivery of its A2000 series chips in 2026. As a result, we increase TP to HK$24.50 (from HK$23.61). Our TP represents a 17.1x/ 8.0x/ 6.5x 2025-2027 EV/S Ratio.
　　Investor focus for Black Sesame is on the commercialization of its C1200 series and A2000 series chipsets, as it will determine whether Black Sesame will be able to maintain its competitiveness going forwards. For existing chipsets including the A1000 series and the C1200 series, the Company has made progress securing designated projects for overseas vehicle models from leading customers, with multiple models equipped with chip-based driving solutions to commence in 2025H2. We also expect the Company’s gross margin to recover in 2025H2 due to a higher proportion of overseas sales to occur in 2025H2. The Company’s overseas business also includes a recent partnership with AEye (LIDR US), which intends to deliver a full-stack plug and play solution to address the safety demand of high-speed transportation networks. The Company is also currently validating the development plans of their A2000 series chips. Part of the Company’s plan to accelerate commercialization also includes R&D initiatives to optimize the performance of algorithms under urban scenarios, and optimizing toolchains for its NPU architecture. The toolchain optimizations are intended to improve ease of use for its end customers, supporting the rapid integration and deployment of diverse algorithm solutions, thereby preventing ecosystem lock- in by competitors.
　　The Company also provided additional color on potential future acquisitions, stating that a potential target is a cost-effective low-power chip enterprise, thereby broadening its product portfolio and helping the Company to expand into other fields, including robotics and edge AI inference. The potential acquisition would fit into the Company’s current plans to deploy its product solutions across new embodied AI products including humanoid robots, robot dogs, legged robots, and robotic lawn mowers. Black Sesame’s robotics chips are currently in the development stage, with business expansion underway in domestic and internationally markets.
　　Risks: lower than expected design wins and enhanced competition within the robotics chip industry.