Robotic actuators and SGI open up new growth opportunities; weak domestic auto market prompts Goldman Sachs to lower forecasts while maintaining Buy on Hesai

Overview

This report combines takeaways from Hesai's 2Q26 earnings conference call and post-results investor discussions, focusing on the development of robotic actuators, the Kosmo spatial intelligence platform, robotic LiDAR, and ADAS LiDAR. Goldman Sachs believes the SGI business is becoming a new growth driver beyond the automotive business, but weakness in the domestic auto market and increased R&D investment will weigh on near-term earnings. It therefore lowers its 2026E-2028E earnings forecasts and target prices while maintaining its Buy rating.

Core views

The 2Q26 results reflected a combination of pressure on the traditional automotive business and initial monetization of new businesses. The company's operating profit was below expectations, mainly due to lower ADAS LiDAR unit sales and higher R&D expenses for new projects. However, the LiDAR segment's EBIT margin rose to 8.1%, improving both year-over-year and quarter-over-quarter. Meanwhile, the SGI segment generated quarterly revenue for the first time, recording RMB45mn in 2Q26, mainly from robotic actuators. Management raised its 2026 SGI revenue guidance from RMB100mn to RMB200mn-RMB300mn and expects revenue to reach approximately US$100mn, or about RMB700mn, in 2027 while reaching breakeven. Robotic actuators are the report's most important new growth theme. Hesai began mass production and delivered approximately 10,000 actuator units to customers in 2Q26. The company aims to increase monthly production capacity to 10,000 units and achieve six-digit annual deliveries, or more than 100,000 units, in 2027. A single humanoid robot may require more than 100 actuators, which could account for over half of the complete machine's bill of materials. Goldman Sachs therefore believes the long-term size of this market could be several times that of the automotive market. The product portfolio will expand from dexterous hands to shoulders, wrists, and other full-body joints, with mass production of full-body actuators expected to begin in 2H26. Current order growth is closely linked to the collaboration with Sharpa, whose customers include Nvidia, Google Gemini, and Galbot. Management is also pursuing partnerships with several leading global AI companies. Hesai believes its actuator advantages stem partly from its high-precision position, speed, and force control capabilities shared with LiDAR, as well as its accumulated expertise in precision manufacturing, motors, and AI. Another advantage comes from sharing a founding team with Sharpa and engaging in highly vertically integrated collaboration, enabling it to accelerate technological iteration based on the actual operation of end products. Current external customers are mainly overseas. The report also notes that following the FCC's proposed restrictions on imports of foreign-produced humanoid robots, Hesai's actuators would be relatively less affected because they are components rather than complete machines with connectivity and mobility capabilities. Another SGI business, the Kosmo spatial intelligence platform, is expected to begin contributing revenue in 3Q26 and plans to generate high-margin recurring revenue through cloud services and 3D spatial asset licensing. After a preview in April, product sampling began in July, and customer orders, including from Galbot, were secured within 7 days. The company plans an official launch in 3Q, targeting eight-digit revenue in 2026. Management said Kosmo can reconstruct scenes at 5 times the speed of peers and recognize 4-millimeter-small text on menus in a restaurant environment of approximately 200 square meters. Its early customers include robotics companies as well as media and digital content companies. Demand for robotic LiDAR is also expanding. Hesai's robotics-related shipments grew 193% year-over-year in 2Q26, above the 138% growth in 1Q26. Goldman Sachs expects robotic LiDAR shipments to grow 174% year-over-year in 2026. The company has partnered with more than 50 embodied intelligence companies globally, including Unitree Robotics, Galbot, and Galaxea, and the JT128 is becoming one of the standard sensors for humanoid and quadruped robots. Management estimates that the long-term number of LiDAR units deployed in the robotics market could be approximately 6 times that of the automotive industry, with demand scenarios expanding to robotic lawn mowers, warehousing, logistics, and Robotaxi. Although the ADAS business is affected by weakness in the domestic auto market, penetration rates and the number of units installed per vehicle still provide medium- to long-term support. Hesai has ranked first in China's long-range ADAS LiDAR market for 17 consecutive months, with a market share of approximately 40%-50%; Gasgoo data showed a 44% share in June 2026. Management expects LiDAR penetration in new energy vehicles to rise from approximately 20% in 2025 to 30%-40% in 2026. Meanwhile, automakers may shift from single-LiDAR to multi-LiDAR configurations to expand coverage and improve safety redundancy. The Li Auto L6 already offers an optional four-LiDAR solution in the mass-market price range. China's L3 and L4 vehicle safety standards, scheduled for implementation in 2027, may also drive the adoption of additional sensors. Goldman Sachs expects revenue growth, margins, and profit levels to improve sequentially over the next several quarters. Revenue is expected to grow 29%-35% quarter-over-quarter from 3Q26E to 4Q26E, compared with a 32% sequential decline in 1Q26. The EBIT margin is expected to recover from 3% in 1Q26 to 11%-15% in 3Q26E-4Q26E. Full-year 2026E revenue is expected to grow 37%, supported by 174% growth in robotic LiDAR shipments, 71% growth in ADAS shipments, and SGI revenue contributions. Changes in the product mix will lower the gross margin from 41.8% in 2025 to 40% in 2026E. Despite continued investment in new businesses, 2026E non-GAAP EBIT is expected to grow 39% year-over-year, with the EBIT margin remaining stable at 9%. Following the results, Goldman Sachs raised its 2026E-2028E SGI revenue forecasts from RMB100mn, RMB500mn, and RMB1.0bn to RMB250mn, RMB700mn, and RMB1.2bn. Meanwhile, due to lower ADAS volume expectations resulting from weakness in the domestic auto market, it lowered its LiDAR unit sales forecasts from 3.3mn, 4.6mn, and 6.0mn units to 3.0mn, 4.2mn, and 5.4mn units and raised R&D expense forecasts due to increased SGI investment. As a result, 2026E-2028E net profit forecasts were lowered from RMB800mn, RMB1.1bn, and RMB1.4bn to RMB600mn, RMB900mn, and RMB1.2bn. In terms of valuation, the 12-month target prices for the ADRs and H-shares were lowered from US$35 and HK$34 to US$31 and HK$30, respectively, but still imply 75% and 74% upside. The target prices apply a 20 times P/E multiple to 2030E non-GAAP EPS and discount the result back to 2026E using an 11% cost of equity. The ADRs currently trade at 36 times and 23 times 2026E and 2027E earnings, respectively, while non-GAAP net profit is expected to post a 49% CAGR from 2026E to 2028E. Goldman Sachs believes the valuation is below the company's average 12-month forward P/E of 37 times since it turned profitable in 4Q24. The report's investment thesis also forecasts 80% earnings growth in 2026E and reiterates the Buy rating accordingly.

Analysis framework

Goldman Sachs first uses the actual 2Q26 results and information from the earnings call to assess changes in the traditional LiDAR business and the new SGI business. It then separately analyzes unit sales, customers, production capacity, penetration rates, and commercialization timelines for robotic actuators, Kosmo, robotic LiDAR, and ADAS LiDAR. Management guidance is subsequently incorporated into segment revenue, LiDAR unit sales, R&D expenses, margin, and net profit forecasts. Finally, a forward non-GAAP EPS and P/E discounting framework is used to calculate the 12-month target prices.

Methodology notes

• Valuation MethodPE/PEG valuation

  Forward P/E Discounted Valuation

  The report applies a 20 times P/E multiple to Hesai's 2030E non-GAAP EPS and discounts it back to 2026E using an 11% cost of equity, deriving 12-month target prices of US$31 for the ADRs and HK$30 for the H-shares.

• Industry/Sector Analysis FrameworkVolume-price decomposition

  Decomposing growth by shipments, penetration rates, per-vehicle configurations, and new-business revenue

  The report separately forecasts robotic and ADAS LiDAR shipments and combines them with new energy vehicle penetration, multi-sensor configurations, actuator deliveries, and SGI revenue contributions to derive changes in revenue and profit.

• Industry/Sector Analysis FrameworkPenetration S-curve

  Rising LiDAR penetration in new energy vehicles

  Management expects LiDAR penetration in new energy vehicles to rise from approximately 20% in 2025 to 30%-40% in 2026, which the report uses to demonstrate continued structural growth potential for ADAS demand.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Hesai Group ADR (HSAI)

  Hesai's US-listed ADRs; the report maintains a Buy rating and assigns a 12-month target price of US$31.

  Strengths

  Robotic actuators have entered mass production, and SGI has begun contributing revenue; robotic LiDAR serves more than 50 customers, while long-range ADAS LiDAR maintains a leading market share.

  Weaknesses

  Weakness in the domestic auto market has reduced ADAS volume expectations, while investment in new businesses has increased R&D expenses, leading to lower 2026E-2028E net profit forecasts.

  Comparison

  The ADRs currently trade at 36 times/23 times 2026E/2027E earnings, below the company's average 12-month forward P/E of 37 times since it turned profitable in 4Q24.

  Risks

  Slower-than-expected LiDAR adoption, intensifying competition, customer pricing pressure, and policy risks.

• Hesai Group H-shares (2525.HK)

  Hesai's Hong Kong-listed H-shares; the report maintains a Buy rating and assigns a 12-month target price of HK$30.

  Strengths

  The H-shares represent the same operating entity as the ADRs and share the growth opportunities arising from robotic actuators, SGI, robotic LiDAR, and rising ADAS penetration.

  Weaknesses

  Weak domestic auto demand and continued R&D investment weigh on near-term profit forecasts.

  Comparison

  The H-share target price implies the report's stated upside of 74%.

  Risks

  Slower-than-expected LiDAR adoption, intensifying competition, customer pricing pressure, and policy risks.

Key data

• 2Q26 SGI RevenueRMB45mnSGI generated quarterly revenue for the first time, mainly from robotic actuators.
• 2026 SGI Revenue GuidanceRMB200mn-RMB300mnPrevious guidance was RMB100mn.
• 2027 SGI Targetapproximately US$100mn (approximately RMB700mn)The company also expects SGI to reach breakeven in 2027.
• 2Q26 Actuator Deliveriesapproximately 10,000 unitsThe company aims to increase monthly production capacity to 10,000 units and achieve annual deliveries of more than 100,000 units in 2027.
• 2Q26 LiDAR Segment EBIT Margin8.1%Improved both year-over-year and quarter-over-quarter.
• 2Q26 Robotics-Related Shipment Growth193% year-over-year growth1Q26 grew 138% year-over-year.
• China Long-Range ADAS LiDAR Market Share40%-50%Ranked first for 17 consecutive months, with a 44% share in June 2026.
• New Energy Vehicle LiDAR Penetrationapproximately 20% in 2025; 30%-40% in 2026Management expects penetration to continue rising.
• 2026E Revenue Growth37%Robotic LiDAR shipments are expected to grow 174%, while ADAS shipments are expected to grow 71%.
• 2026E Gross Margin40%The figure was 41.8% in 2025, with the decline mainly due to changes in the product mix.
• 2026E Non-GAAP EBIT39% year-over-year growthThe EBIT margin is expected to remain stable at 9%.
• 3Q26E-4Q26E Sequential Revenue Growth29%-35%1Q26 revenue declined 32% quarter-over-quarter.
• 3Q26E-4Q26E EBIT Margin11%-15%The figure was 3% in 1Q26.
• 2026E-2028E Net Profit ForecastsRMB600mn/RMB900mn/RMB1.2bnPreviously RMB800mn/RMB1.1bn/RMB1.4bn.
• 2026E-2028E LiDAR Unit Sales Forecasts3.0mn/4.2mn/5.4mn unitsPreviously 3.3mn/4.6mn/6.0mn units.
• Target Price Valuation Parameters20 times 2030E non-GAAP EPS, 11% cost of equityDiscounted back to 2026E to calculate the 12-month target prices.
• ADR Valuation2026E 36 times; 2027E 23 times P/EThis compares with a 49% CAGR in non-GAAP net profit from 2026E to 2028E and the company's average 12-month forward P/E of 37 times since it turned profitable.

Impact & implications

Goldman Sachs believes Hesai's growth drivers are expanding from automotive LiDAR to robotic actuators, robotic LiDAR, and spatial intelligence services, significantly enlarging its long-term addressable market. In the near term, weak domestic auto demand and R&D investment in new businesses will reduce unit sales and earnings forecasts, but SGI commercialization, rising ADAS penetration, overseas design wins, and economies of scale continue to support operating improvements over the coming quarters and the Buy thesis.

Risks

• LiDAR adoption may be slower than expected.
• Intensifying industry competition may affect market share and profitability.
• Customer pricing pressure may reduce product prices and margins.
• Policy changes may affect the commercialization of ADAS, robotics, or related products.

What to watch

• Progress in increasing monthly robotic actuator production capacity and achieving the target of more than 100,000 annual deliveries in 2027.
• Progress in commencing mass production of full-body actuators in 2H26 and expanding applications to shoulder, wrist, and other joints.
• Kosmo's official launch in 3Q26, initial revenue contribution, and progress toward generating eight-digit revenue in 2026.
• Progress toward SGI generating RMB200mn-RMB300mn in revenue in 2026 and reaching breakeven in 2027.
• New customer design wins, LiDAR adoption in new models from global automakers, and progress toward mass production of overseas ADAS projects in 2026E/2027E.
• Whether 3Q26E-4Q26E sequential revenue growth of 29%-35% and EBIT margin recovery to 11%-15% can be achieved.
• Changes in demand resulting from new energy vehicle LiDAR penetration, multi-LiDAR configurations, and the 2027 L3/L4 safety standards.
• The impact of quarterly results and the domestic auto market on ADAS LiDAR unit sales.