Goldman Sachs reiterates Buy on Hesai: solid LiDAR core business, SGI opens a second growth curve

Overview

This is Goldman Sachs' company research note after Hesai Group's 1Q26 earnings call. The core conclusion is to maintain a Buy rating: Hesai's LiDAR core business delivered solid revenue and gross margin performance, and operating expense control drove EBIT to beat expectations. At the same time, the company is entering the Strategic Growth Initiative (SGI) through KOsMO spatial intelligence devices and robot execution modules, extending from "spatial perception" to "spatial intelligence" and forming a potential second growth curve.

Core views

Goldman Sachs believes Hesai's investment case is supported by three main drivers: first, the LiDAR core business benefits from NOA penetration in China's NEV market, L3 autonomous driving upgrades, and volume ramp-up of low-cost products; second, global design wins are accelerating, including the Mercedes-Benz L3 strategic supplier agreement, GAC Toyota's 2026 bZ3X design win, and Xiaomi's overseas project; third, KOsMO and robot execution modules bring in SGI business that could eventually contribute higher gross margins and more recurring software/platform-type revenue.

Analysis framework

The report is based on 1Q26 results, management guidance, order book and product launch information, combined with Goldman Sachs' forecasts for 2026E-2030E revenue, shipments, ASP, gross margin, EBIT and net profit. It applies a valuation approach that discounts 2030E EPS back to 2026E and compares the result with the company's historical forward P/E and profit growth on a relative basis.

Methodology notes

• Valuation methodsP/E target price method

  Discount 2030E EPS at 20x back to 2026E

  Goldman Sachs' 12-month ADR/H-share target price of US$35/HK$273 is based on 20x 2030E non-GAAP EPS and discounted back to 2026E using an 11% cost of equity.

• Fundamental forecastRevenue-shipment-ASP decomposition

  Build the revenue forecast using LiDAR shipment growth, mix ASP changes, and new business revenue

  Goldman Sachs expects 2026E revenue to grow 50%, supported by 101% YoY growth in LiDAR shipments, partly offset by a 27% YoY decline in mix ASP; SGI revenue is incorporated into the model based on management orders and guidance.

• Factor frameworkGS Factor Profile

  Comparison across Growth, Financial Returns, Multiple, and Integrated

  Goldman Sachs' factor framework compares stocks with the market and industry peers through growth, financial returns, valuation multiples, and integrated percentile ranking.

Asset mapping & comparison

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

• Hesai Group (H) 2525.HK

  Core coverage name

  Strengths

  H-share target price HK$273, reiterated Buy; benefiting from LiDAR volume ramp-up, global OEM design wins, and the launch of SGI new businesses.

  Weaknesses

  ASP pressure and weak demand in China's auto market may weigh on near-term gross margin.

  Comparison

  Current price HK$158.50, implying about 72% upside; shares the same fundamental logic as the ADR.

  Risks

  Slower-than-expected LiDAR penetration, intensifying competition, customer price-cut pressure, and policy risk.

• Hesai Group (ADR) HSAI.US

  Core coverage name

  Strengths

  ADR target price US$35, reiterated Buy; 2026E/2027E P/E of 30x/21x, below the 37x 12-month forward average after turning profitable.

  Weaknesses

  The stock price and target price have historically been volatile, so valuation is sensitive to earnings delivery and risk appetite.

  Comparison

  Current price US$20.25, implying about 73% upside.

  Risks

  LiDAR adoption speed, price competition, overseas project mass-production timing, and policy uncertainty.

• LiDAR industry chain

  Primary business exposure

  Strengths

  L3 autonomous driving, NOA penetration, low-cost products, and overseas ADAS design wins are driving demand growth.

  Weaknesses

  Industry price competition and customer bargaining power may lead to ASP declines.

  Comparison

  Hesai has a leading base with 33% of global LiDAR revenue share and 61% robotaxi market share in 2024.

  Risks

  Technology pathway changes, delayed automaker procurement cycles, and competitor price cuts.

• SGI/KOsMO/robot execution module

  Second growth curve

  Strengths

  Spatial intelligence devices, physical AI data, software platform usage, and cloud services may bring higher gross margins and recurring revenue.

  Weaknesses

  The business is still early stage, with lower visibility beyond 2027E-2030E.

  Comparison

  Management's long-term goal is for the scale to be comparable to the core LiDAR business, but near-term revenue is still smaller than the core business.

  Risks

  Order conversion, product mass production, customer adoption, and the commercialization pace of data and model services may fall short of expectations.

Key data

• 1Q26 EBIT beat47%/63% above GSe/VA ConsensusMainly due to lower operating expenses.
• 2026 shipment guidance3-3.5 million unitsManagement maintained full-year guidance against the backdrop of softness in China's auto market at the start of the year.
• 2026 gross margin guidanceabout 40%Goldman Sachs expects 2026E gross margin of 40%, down from 41.8% in 2025, mainly due to product mix and ASP pressure.
• 2Q26 revenue guidanceRMB 850-900 millionThe midpoint implies YoY/QoQ growth of 25%/29%.
• 2Q26 LiDAR shipment guidance650,000 unitsYoY/QoQ growth of 85%/38%.
• 2026E revenue growth50%Supported by 101% LiDAR shipment growth, partially offset by a 27% decline in mix ASP.
• 2026E EBIT growth139%Goldman Sachs expects the EBIT margin to rise from 9% in 2025 to 15% in 2026E.
• SGI revenue targetabout RMB 100 million in 2026; about RMB 500 million in 2027The long-term goal is for the scale to be comparable to the core LiDAR business.
• Target priceADR US$35; H-share HK$273Unchanged, implying about 73%/72% upside.
• Valuation2026E/2027E P/E of 30x/21xCompared with a 2025-2027E net profit CAGR of 40%, this is below the company's post-turnaround 12-month forward average P/E of 37x.
• Market share33% of the global revenue market share in 2024; 61% global robotaxi market shareUsed to support the company's leading position in LiDAR and robotaxi.

Impact & implications

The report is broadly positive for Hesai. On the core business side, L3 autonomous driving is expected to lift LiDAR value per vehicle from about US$200 at L2 to above US$350, and potentially to US$500-1,000. Global OEM design wins and overseas capacity help reduce the risk of volatility from any single market. On the new business side, if SGI delivers as planned, the company will expand from a hardware shipment model to a more recurring revenue model involving spatial data, model training, cloud services, and platform usage, raising the long-term revenue ceiling and operating margin flexibility.

Risks

• Slower-than-expected LiDAR adoption.
• Intensifying industry competition.
• Customer pricing pressure and ASP declines.
• Policy risk.
• SGI new business order delivery and commercialization progress falling short of expectations.
• Delayed mass production timing for overseas OEM projects.

What to watch

• The ramp-up of new global OEM design wins and existing design wins.
• Whether the 2026 shipment guidance of 3-3.5 million LiDAR units can be achieved.
• The actual completion of 2Q26 revenue guidance of RMB 850-900 million and shipment guidance of 650,000 units.
• Changes in per-vehicle LiDAR value from L3 autonomous driving penetration.
• KOsMO orders, software/platform usage revenue, and the launch cadence of robot execution modules.
• Whether gross margin can stay around 40% and the contribution of operating leverage to EBIT margin.
• Quarterly results, new model LiDAR launches, and customer price-cut pressure.