Mixed 2Q26 Results, with SGI Emerging as a New Structural Bright Spot

Overview

Morgan Stanley believes Hesai's 2Q26 results were mixed: revenue, gross-margin, and ASP trends were better than prior market concerns, and the robotics LiDAR business grew strongly; however, total shipments fell slightly short of guidance, rising R&D expenses pressured operating profit, and the improvement in net profit was primarily driven by non-operating items such as investment gains and interest income. The report views progress in the SGI project as a more important medium- to long-term structural catalyst.

Core views

Weaker production at automotive customers caused total shipments to come in slightly below expectations, but an improved product mix or easing price competition supported ASP and gross margin. Hesai secured more LiDAR projects from joint-venture brands such as GAC Toyota and Volkswagen China, supporting market-share expansion. Management raised the 2026 SGI (robotic actuators and Kosmo) revenue target from Rmb100mn to Rmb200-300mn and raised the 2027 target to US$100mn; project breakthroughs in this business are the report's most closely watched structural growth variable.

Analysis framework

The earnings review is based on quarterly operating data, management guidance, shipment and ASP estimates, customer production schedules, and segment business progress; valuation uses a DCF base case.

Methodology notes

• Valuation methodsDiscounted Cash Flow (DCF)

  Base-case valuation

  Valuation uses an 11.2% WACC and a 3% perpetual growth rate.

• Operating AnalysisShipment Volume and ASP Analysis

  Volume, price, and product mix

  LiDAR shipment volume, revenue, and gross-margin changes are used to assess demand, price competition, and sales mix.

Asset mapping & comparison

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

• HSAI.US

  Directly Covered Name

  Strengths

  High growth in robotics LiDAR; improved gross margin; moderate ASP decline; wins with joint-venture brands; raised SGI revenue target.

  Weaknesses

  Total shipments slightly below guidance; operating profit weighed down by R&D expenses; net profit depends on non-operating gains.

  Comparison

  Robotics LiDAR shipments outperformed peers; the automotive segment was affected by weaker output from key customers.

  Risks

  LiDAR adoption below expectations, faster ASP declines, technological substitution, and changes in technology standards.

Key data

• 2Q26 RevenueRmb861mn, up 22% year-over-year and 26% quarter-over-quarterCorresponding blended LiDAR ASP was approximately Rmb1.4K, down 5% quarter-over-quarter.
• 2Q26 GAAP Net ProfitRmb71mn, up 60% year-over-yearPrimarily driven by Rmb37mn of investment gains and an Rmb38mn year-over-year increase in interest income.
• 2Q26 Operating ProfitRmb2mn, down 90% year-over-yearHigher R&D expenses pressured operating profit.
• 2Q26 Gross Margin40.1%Up 1.0 percentage point quarter-over-quarter, meeting management guidance.
• 2Q26 LiDAR Shipments628,000 units, up 78% year-over-year and 33% quarter-over-quarterSlightly below prior guidance of 650,000 units; cumulative 1H26 shipments were approximately 1.1mn units.
• 2Q26 Robotics LiDAR Shipments142,000 units, up 193% year-over-yearGrowth was substantial and outperformed peers.
• 3Q26 Revenue GuidanceRmb1,100-1,150mnUp 38%-45% year-over-year.
• 2026 SGI Revenue TargetRmb200-300mnThe prior target was Rmb100mn.
• 2027 SGI Revenue TargetUS$100mnApproximately Rmb674mn, above the prior Rmb500mn target.

Impact & implications

In the near term, investors should monitor whether full-year profit guidance of Rmb500-700mn can be achieved and how production at key automotive customers affects shipment momentum. Over the medium term, rising robotics LiDAR volume, wins with joint-venture brands, a narrowing ASP decline, and SGI commercialization progress could all improve growth quality and the valuation thesis.

Risks

• Traditional OEMs may adopt LiDAR more slowly than expected.
• OEM price cuts and cost controls may cause ASP to decline faster than expected.
• Emerging technologies may pose a substitution threat to LiDAR.
• If LiDAR technology standards shift in a manner incompatible with the company's existing specifications, competitiveness could weaken.
• Production fluctuations at key customers may affect automotive LiDAR shipments.
• SGI project commercialization or revenue realization may fall short of expectations.

What to watch

• Updates on and delivery against full-year profit guidance of Rmb500-700mn.
• Whether 3Q26 revenue can reach the Rmb1,100-1,150mn guidance range.
• SGI project breakthroughs, order conversion, and revenue-recognition progress.
• The sustainability of robotics LiDAR shipment growth.
• Changes in blended ASP, gross margin, and price competition.
• Mass-production progress for joint-venture brand projects including GAC Toyota and Volkswagen China.