Horizon Robotics 1H26 preliminary revenue came in below expectations, but margin resilience supports the "Outperform" rating

Overview

This report comments on Horizon Robotics' 1H26 preliminary results. The company's revenue was clearly below Bernstein and market expectations, mainly due to declining China passenger vehicle sales and slower-than-expected progress in new design wins; however, gross margin remained resilient and expense control was disciplined, limiting the deviation in recurring earnings. The report maintains an Outperform rating and HKD 10 target price.

Core views

The core views are: first, the revenue gap was large, but it did not materially damage earnings quality, because gross margin held at a 63.1% mid-point and the non-GAAP recurring net loss was close to forecast; second, progress in cooperation with BYD helps ease market concerns that OEM in-house chip development will replace Horizon chips; third, the share price correction over the past six months has already reflected weak passenger vehicle demand and the competitive risk from OEM in-house development, and the current valuation provides a relatively wide margin of safety for long-term investors.

Analysis framework

The report combines preliminary results comparison, earnings quality decomposition, tracking of customer cooperation progress, and a valuation multiples approach. Key comparisons include deviations in 1H26 revenue, gross profit, gross margin, GAAP net profit, and non-GAAP recurring net loss versus Bernstein forecasts and Bloomberg consensus expectations, together with BYD GodEye cooperation and share price performance to assess whether risks have already been priced in.

Methodology notes

• Valuation methodsEV/Sales multiple

  valuation based on EV/Sales multiple

  Bernstein derives the HKD 10 target price based on 2BF sales of RMB 11.5bn and 10.3x EV/Sales.

• earnings_analysispreliminary results variance analysis

  preliminary results variance analysis

  Compare 1H26 revenue, gross margin, and recurring net loss with Bernstein forecasts and market consensus expectations to assess the actual impact of the revenue gap on earnings.

• rating_frameworkBernstein Outperform definition

  definition of outperforming the index

  Bernstein's Outperform indicates that the stock is expected to outperform the relevant market index by more than 15 percentage points over the next 12 months.

Asset mapping & comparison

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

• Horizon Robotics (9660.HK)

  covered company and core investment target

  Strengths

  Gross margin remains above 60%, with effective expense control; among third-party smart driving chip suppliers, it is seen as one of the few players capable of taking share from Nvidia; cooperation with BYD provides potential share gains.

  Weaknesses

  1H26 revenue was materially below forecasts and consensus expectations, affected by declining China passenger vehicle sales and slower-than-expected progress in new design wins; the company remains in a non-GAAP recurring loss position.

  Comparison

  The report compares the company's performance with Bernstein forecasts, Bloomberg consensus expectations, and the ASIAX index; relative performance versus ASIAX over the past 12 months has significantly lagged.

  Risks

  Slower-than-expected improvement in smart driving penetration, OEM in-house development taking more share, and delayed shipments or deployments by major customers leading to downside in revenue growth.

Key data

• RatingOutperformThe report maintains its rating on Horizon Robotics.
• Target priceHKD 10.00Based on 10.3x EV/Sales and 2BF sales of RMB 11.5bn.
• Closing priceHKD 4.45The closing date was 2026-07-21.
• Implied upside125%Disclosed in the report's ticker table.
• 1H26 mid-point revenueRMB 2.005bnUp 29.7% year-on-year, 10.6% below Bernstein's forecast and 15.1% below consensus expectations.
• 1H26 mid-point gross margin63.1%210bps above Bernstein's forecast and 83bps above consensus expectations.
• GAAP net profitRMB 3.5bn-4.0bnMainly from fair value gains on convertible bonds after the share price decline, a non-cash item.
• Mid-point non-GAAP recurring net lossRMB -1.55bnClose to Bernstein's forecast of RMB -1.584bn and consensus expectations of RMB -1.609bn.
• Market capitalizationHKD 64,844mnDisclosed in the report's ticker table.
• EVHKD 36,440mnDisclosed in the report's ticker table.

Impact & implications

In terms of investment implications, the report believes the market has largely priced in weak revenue, declining passenger vehicle demand, and the competitive risk from OEM in-house chip development; if revenue recovers in 2H26, the full-year shipment target is maintained, and cooperation with BYD is delivered, the room for valuation recovery may outweigh the negative impact from the near-term revenue shortfall.

Risks

• Smart driving penetration improves less than expected.
• OEM in-house chips gain more share than expected.
• Delayed shipments or deployments by major customers, resulting in lower-than-expected revenue growth.
• Weak China passenger vehicle sales continue to weigh on demand.
• Progress in new design wins is slower than expected.
• The turn to positive GAAP net profit mainly comes from non-cash fair value gains on convertible bonds and does not directly represent an improvement in operating profitability.

What to watch

• Whether 2H26 revenue recovers in line with management guidance.
• Whether the full-year shipment target is maintained and delivered.
• Launch progress of the first BYD GodEye B model equipped with J6H.
• Whether Horizon's wallet share in the BYD GodEye C program can rise from about 40% in 2025 to above 90% in 2027.
• Whether gross margin can remain above 60% amid intensifying competition.
• Whether the pace of winning new design wins improves.