HSBC maintains Buy on Horizon Robotics with unchanged target price of HKD11.50

Overview

This is a company research report on Horizon Robotics (9660.HK). HSBC maintains its Buy rating and HKD11.50 target price, arguing that the market's recent concerns around weak China auto demand, slower-than-expected HSD ramp-up, OEM in-house substitution, AD software feature commoditization, and chip/software ASP pressure may underestimate the company's potential value in transforming from a component supplier to a platform-level participant.

Core views

The report's core view is that the debate around Horizon Robotics should not focus only on whether it can continue selling chips or per-vehicle content in the same way, but on whether it can assume a higher-value role in OEM autonomous driving architectures. BYD's in-house AD chip and software capabilities will change the mode of participation, but will not necessarily eliminate platform suppliers; as AD moves from a premium feature toward the mass market, reliability, cost, iteration speed, and safety responsibility will make hardware-software integration capabilities more important.

Analysis framework

The report analyzes the company from six angles: market concerns, the BYD variable, AD standardization and commoditization, hardware/software integration barriers, migration in content hierarchy, and valuation. HSBC classifies Horizon Robotics' business role into three layers: component content, solution content, and platform-level participation, and believes the strategic upside mainly comes from the third layer.

Methodology notes

• Valuation methodDiscounted PS valuation method

  Derive forward market value from 2031e revenue and a target PS multiple, then discount back to 2026e

  HSBC uses 2031e as the base year, assuming L2++/L3 and above autonomous driving functions will be fully penetrated in the China market by 2031, and applies a 6.6x target PS, 2031e revenue of RMB38,042m, and an 11.6% cost of equity to derive the HKD11.50 target price.

• Industry analysis frameworkComponent content, solution content, platform-level participation

  Upgrade from selling chips or domain controllers to chips plus software stack, and then to participating in OEM autonomous driving architecture

  The report argues that the market is still focused on the first layer of component content, but Horizon Robotics' strategic upside lies in the third layer, namely participating in OEM platforms through silicon, AI cores, software, toolchains, OTA, data, and system optimization.

• Catalyst trackingPlatformization evidence framework

  Observe whether the company is moving from vehicle-model-level content to platform-level participation

  Key evidence includes new or expanded OEM orders, platform-level cooperation, post-certification wallet share gains, external AD adoption catalysts, and technical/product signals such as HSD upgrades, MPI improvement, and City NOA user experience.

Asset mapping & comparison

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

• Horizon Robotics (9660.HK)

  Core covered name, a Hong Kong-listed autonomous driving solutions company

  Strengths

  Possesses hardware-software integration capabilities and can extend from chip sales to AI core licensing, joint chip development, software tools, and system-level optimization.

  Weaknesses

  In the short term, affected by HSD ramp-up pace, weak China auto demand, ASP pressure, and market concerns over supplier substitution.

  Comparison

  Compared with single-component suppliers, the report argues it should be viewed more as a potential platform-level partner; compared with large OEM in-house solutions, its value lies in reliability, cost, iteration speed, and integration capability.

  Risks

  Failure to secure more HSD orders, insufficient platformization progress, being squeezed by OEM vertical integration, and intensifying pricing pressure.

• BYD

  Industry standard setter and a key variable in the Horizon Robotics investment debate

  Strengths

  Strong in scale, vertical integration, and execution; its in-house AD push validates that mass-market AD is becoming standard equipment.

  Weaknesses

  A stronger desire for internal control may compress the traditional component space for third-party suppliers.

  Comparison

  The report believes BYD may both create pressure from in-house substitution and expand demand for platform-level partners by raising industry AD standards.

  Risks

  If BYD and other large OEMs accelerate in-house development and reduce cooperation with external platforms, Horizon Robotics' addressable market and pricing power may come under pressure.

• China autonomous driving industry chain

  The main demand and valuation backdrop for Horizon Robotics

  Strengths

  Rising penetration of highway and urban NOA, with AD moving from a premium differentiating feature toward standard configuration, creating opportunities for scaled deployment.

  Weaknesses

  Physical AI has a long cash-flow realization cycle and is constrained by hardware integration, safety validation, supply-chain scale, regulation, and consumer acceptance.

  Comparison

  Compared with pure AI driven by token growth, autonomous driving relies more on proof from real-world deployment and mass-production capability.

  Risks

  Weak demand in China's auto market, slow regulatory progress, insufficient consumer willingness to pay, or key vehicle models ramping up below expectations.

Key data

• RatingBuy (maintained)The report explicitly maintains the Buy rating.
• Target priceHKD11.50Target price unchanged.
• Share priceHKD3.86Based on the closing price on June 25, 2026.
• Implied upsideapproximately 198%Calculated based on target price relative to share price.
• Market capitalizationHKD48,092m / USD6,134mReport market data.
• 2026e/2027e/2028e revenueCNY6,693m / CNY10,978m / CNY16,640mHSBC forecast.
• 2026e/2027e/2028e HSBC EPSCNY-0.27 / CNY-0.14 / CNY0.06Earnings are expected to turn positive by 2028e.
• 2031e revenueRMB38,042mBase revenue for discounted PS valuation.
• Target PS6.6xHSBC target PS multiple unchanged.
• Cost of equity11.6%Derived from a 4.25% risk-free rate, 4.75% China H-share market risk premium, and approximately 1.5 beta.
• 12-month forward PS5.0xBelow the post-listing average of 15.3x.
• 12-month forward PB6.1xBelow the historical average of 11.4x.

Impact & implications

If HSBC's judgment is correct, Horizon Robotics' valuation logic may shift from a pure chip-supplier discount to an autonomous-driving platform participant premium. In the short term, the share price may still be affected by OEM in-house development, pricing pressure, and auto-market demand, but the medium-term key is whether the company can use new orders, platform cooperation, and product experience to prove its irreplaceability within mass-production autonomous driving architectures.

Risks

• Failure to win more HSD orders as a platform-level participant.
• Consumer acceptance of cockpit-driving integration chips is lower than expected.
• Weak beta in China's auto industry drags on ramp-up of key vehicle models, especially key HSD models.
• Major customers' AD progress is slower than expected.
• Automakers further strengthen vertical integration, reducing room for third-party suppliers.
• Suppliers face higher-than-expected pricing pressure.
• The company's progress in penetrating China's higher-level AD market is slower than expected.

What to watch

• New or expanded OEM orders, especially major HSD-related OEM nominations.
• Deeper hardware-software integration, architecture-level cooperation, chip royalties, or cockpit-driving integration projects.
• Whether wallet share can increase across more platforms and vehicle models after certification.
• External adoption catalysts such as Tesla FSD commercialization in China and progress of regulated AD systems in Europe.
• HSD2.0 launch, test-drive feedback, MPI improvement, City NOA user experience, and progress in All-in-One/cockpit-driving integration.