Horizon Robotics (09660) Report Interpretation

Overview

This conference-takeaways update focuses on Horizon Robotics' growth path in China smart driving. Morgan Stanley highlights BYD program ramps, continued ADAS share ambitions, improving business-model mix and several sources of optionality beyond core automotive chips.

Core views

Morgan Stanley identifies BYD as a crucial growth driver. Horizon targets the lion's share of BYD's God's Eye C program in 2H26 as chip and HSD deployment ramp, while project wins for God's Eye B are expected to enter mass production by year-end. The institution also notes that BYD's increasing in-house chip development could shift Horizon's model toward IP and licensing, rather than solely hardware supply. Management expects shipments to exceed 7 million units, representing roughly 40% year-on-year growth. The report says greater outsourced assembly of the J6P DCU should support gross-profit margin, although revenue per unit would be lower. This frames the outlook as one where shipment expansion and product/assembly mix matter jointly for financial performance. The report argues that Horizon's competitive advantage versus global chip peers remains intact. It targets ADAS market share above 50%, and expects its advanced-AD volumes to surpass those of the leading global player. Premium EV start-ups, BYD and other leading OEMs are increasingly replacing global AD chips with internally developed solutions or Horizon products, supporting the company's domestic competitive positioning. Beyond ADAS, Morgan Stanley points to further licensing-revenue ramp from Volkswagen in 2H, 10 global Toyota project wins, and additional wins with Chery and Voyah. J7 is scheduled to launch next year, robotaxi could scale toward 2028, and Horizon's approximately 40%-owned sister company D-Robotics may provide further investment-gain optionality. Morgan Stanley values Horizon using a probability-weighted DCF with 25% bull, 50% base and 25% bear weights. The model assumes a 12.2% WACC, 1.9 beta and 3% long-term growth rate. The balanced bull and bear probabilities reflect the institution's constructive view on China ADAS/AD volume-share gains, tempered by rising competition and potential geopolitical headwinds.

Analysis framework

Morgan Stanley combines management conference takeaways on customer programs, shipment volumes, outsourcing and product launches with competitive assessment of China ADAS demand and OEM sourcing. It then applies a probability-weighted DCF using bull, base and bear scenarios to reflect growth potential alongside competitive and geopolitical uncertainty.

Methodology notes

• Valuation methodsDCF (Discounted Cash Flow)

  Probability-weighted discounted cash flow valuation

  The report values Horizon by weighting bull, base and bear DCF outcomes at 25%, 50% and 25%, respectively, using a 12.2% WACC, 1.9 beta and 3% long-term growth assumption.

• Industry AnalysisSupply-demand framework

  ADAS/AD adoption and OEM demand assessment

  The report links Horizon's shipment and share outlook to adoption of ADAS and autonomous-driving functions in China, OEM program ramps and customer sourcing choices.

Asset mapping & comparison

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

• Horizon Robotics (09660.HK)

  Primary covered company; expected to benefit from BYD program ramps, China ADAS share gains and licensing expansion.

  Strengths

  Targeted >50% ADAS market share; advanced-AD volumes expected to exceed the leading global player; customer and project momentum.

  Weaknesses

  More outsourced J6P DCU assembly may reduce revenue per unit.

  Comparison

  Premium EV start-ups, BYD and other leading OEMs are increasingly replacing global AD chips with in-house or Horizon solutions.

  Risks

  Slower China ADAS/AD adoption, supply-chain disruption, successful OEM in-house hardware programs and vehicle-sales pressure at key customers.

Key data

• Shipment outlook>7 million unitsManagement expectation; approximately 40% year-on-year growth.
• ADAS market-share target>50%Horizon targets a majority share of the ADAS market.
• Target priceHK$8.70Morgan Stanley target price; 111% upside stated.
• Current priceHK$4.13As of September 17, 2026.
• FY2026E revenueRmb6,092 millionMorgan Stanley estimate, versus Rmb3,758 million in FY2025.
• FY2027E revenueRmb9,381 millionMorgan Stanley estimate.
• FY2028E revenueRmb13,300 millionMorgan Stanley estimate.
• FY2028E EBITDARmb1,559 millionMorgan Stanley estimate, following negative EBITDA through FY2027E.

Impact & implications

The report's positive case rests on BYD program execution, sustained domestic ADAS share gains and a potential transition toward higher-value IP and licensing revenue. Volkswagen licensing, Toyota and other global project wins, J7, robotaxi expansion and D-Robotics are presented as additional optionality beyond the core ADAS chip business.

Risks

• ADAS/AD adoption in China could grow more slowly than expected.
• Supply-chain disruption could affect operations.
• OEMs could successfully advance in-house hardware design initiatives.
• Vehicle-sales pressure among key China customers could weaken demand.
• Rising competition and geopolitical headwinds could affect the smart-driving business.

What to watch

• Ramp progress for BYD God's Eye C in 2H26 and mass production of God's Eye B projects by year-end.
• Whether shipments exceed 7 million units and deliver roughly 40% year-on-year growth.
• The gross-margin effect of increased outsourced J6P DCU assembly.
• Further Volkswagen licensing revenue in 2H and execution of Toyota, Chery and Voyah projects.
• J7 launch next year and the potential robotaxi scale-up toward 2028.