1H25 results: ASP and volume surged, driving 68% sales growth
　　Horizon Robotics delivered strong 1H25 results, with revenue surging 68% YoY to RMB1.57bn, propelled by a 250% YoY growth in auto product solutions. The company reinforced its leadership in China’s auto tech segment, capturing 45.8% share in ADAS solutions market and 32.4% in overall intelligent assisted driving solutions among Chinese OEMs, per mgmt.. Despite a 13.7ppt YoY contraction due to product mix shifts, GPM remained elevated at 65.4%. Net loss slightly widened to RMB5.2bn (vs. 1H24: RMB5.1bn), due to continued heavy investments in R&D (including Horizon SuperDrive and cloud training), along with share-based compensation and JV losses. We remain positive on Horizon’s competitive positioning amid accelerating ADAS/AD adoption in China. Reiterate BUY with a revised TP of HK$12.3 (30x 2030E P/E).
　　Product Solutions: key growth engine going forward. Segment revenue soared 250% YoY to RMB778mn in 1H25, underpinned by robust shipment growth and a rising blended ASP. Shipments doubled to 2mn units, with mid- to high-end units surging 6x YoY to 1mn. This was fueled by rapid penetration of NOA features in China, which climbed from 20% in 2024 to 32% in 1H25. Blended ASP jumped ~70% YoY, reflecting a richer product mix. Strong adoption from BYD and Li Auto continues, with Geely, Chery, and Chang’an ramping up. Mgmt. also secured new deals with two Japanese OEMs (>7.5m lifecycle volumes). We forecast 2025/26E chips/solutions shipments of 4.3m/6.6m units, with ASP rising 100%+/29% YoY. We project product solution revenue to reach RMB2.1bn this year, with 60%/40% sales breakdown between product solution and license/service segments (vs. 29%/71% in 2024). We also forecast the growth of product solution sales will accelerate in the following years.
　　Margins: structural shift, still healthy. We expect gross margin to stabilize above 50% in long term. The 13.7ppt YoY decline in 1H25 reflects the growing contribution of chips sales (50% of revenue in 1H25 vs. 24% in 1H24), which carry lower margins than license/service segments. Nonetheless, product solution GPM improved 3.9ppt to 45.6%, thanks to a higher-value mix. License/service margin dipped 3.2ppt to 89.7% on increased employee costs. We project overall GPM of 63.8% in 2025E and 58.1% in 2026E, reflecting a balance between growing chips revenue and improving chips margins (driven by premium J6 adoption and HSD monetization).
　　Reiterate BUY with TP at HK$12.3, based on 30x 2030E P/E (vs. 21.5x before), in line with peers’ avg. We see continued tailwinds from China’s push for “intelligent driving equality,” supporting faster L2+ adoption. Key risks: slower industry uptake, rising competition, and semiconductor supply- chain tension.