On March 26, China's intelligent driving solution provider Horizon Robotics (Horizon Robotics) officially disclosed its prospectus on the Hong Kong Stock Exchange. Goldman Sachs, Morgan Stanley, and CITIC Construction Investment International are co-sponsors of this IPO.

Revenue and gross profit have more than tripled in three years, and gross margin has stabilized at around 70%

According to data, Horizon was founded in 2015. Its solutions integrate leading algorithms, dedicated software, and advanced processing hardware to provide core technology for advanced assistance and advanced autonomous driving. In 2021, the company began large-scale deployment of front-mounted smart driving solutions for mass production.

Since then, Horizon's performance has soared — revenue soared from 467 million yuan (RMB, same unit) in 2021 to 1,552 billion yuan in 2023, with a compound annual growth rate of 82.3%; corresponding gross profit rose from 331 million yuan to 1,094 million yuan, with a compound annual growth rate of 81.8%, all of which have achieved rapid growth of more than three times over three years.

(Data source: company prospectus)

While performance is growing rapidly, Horizon still maintains a high and stable level of gross margin. The data shows that in the past three years, the company's gross margin level has basically stabilized at around 70%. This shows that the company's products are competitive enough in the market.

The explosion of Horizon's performance is clearly the result of strong resonance between long-term layout and the smart driving industry.

Customers include almost all mainstream domestic OEMs, and the order reserve is over half

Based on the passenger car market, Horizon is able to obtain product solutions, licensing and service revenue by providing comprehensive intelligent driving solutions to OEMs and Tier 1 to meet the diverse needs of customers, from mainstream advanced assisted driving (ADAS) to advanced autonomous driving (AD).

According to information, at present, Horizon's solutions have penetrated almost all mainstream domestic car companies, and customers include the top ten OEMs such as SAIC Motor Group, FAW Group, Changan Automobile, and Geely Automobile. Now the company is not only the largest supplier of intelligent driving solutions for BYD and Ideal Auto, but also entered a joint venture brand last year to establish strategic cooperation with the Volkswagen Group. Additionally, Horizon has established strategic partnerships with leading global tier 1 suppliers such as Ambofol, Bosch, Continental Group, Denso, and ZF.

In terms of revenue structure, automotive solutions are currently the most important source of revenue, contributing more than 85% of revenue and continuing to rise year by year.

(Data source: company prospectus)

Revenue from licensing services accounts for a large share of this, that is, revenue from Horizon's algorithm software licensing and technical services directly accounted for 62.1% of total revenue in 2023. This actually reflects Horizon's ability to innovate on the software side from the side.

Autonomous driving is a recognized capital-intensive racetrack that relies on a high R&D investment model to drive continuous innovation in technology and products to maintain market competitiveness, and the horizon is no exception. According to the prospectus data, the company's R&D expenditure increased from 1,144 billion yuan in 2021 to 2,366 billion yuan in 2023; more than 70% of the company's employees are in R&D.

However, Extraordinary Horizon has always had no shortage of capital fans, providing it with a steady stream of ammunition. Over the past eight years, after many rounds of financing, there is already a strong circle of investors behind it, including Volkswagen, SAIC Motor, Wuyuan Capital, Gaoqi, Sequoia China, BYD, Ningde Times, Chery, etc.

Of course, due to excessive investment in R&D, it is also an important factor that has caused Horizon to not be profitable yet. According to the prospectus, as of January 31 this year, Horizon owned about 10.307 billion yuan in cash and cash equivalents and 701 million yuan in unused bank loans.

On the other hand, looking at Horizon's positive growth trends and company expectations over the past few years, there is no need to worry. The company clearly stated in its prospectus that despite rapid growth, economies of scale have yet to be fully unleashed. In addition, due to extensive OEM coverage, the company has obtained order reserves of up to 50% or more for a large number of models that have not yet been mass-produced, which can further support the company's revenue growth in the next few years.

The local OEM market jumped second last year, with huge potential for growth

Looking at the industry, 2023 ushered in a critical juncture -- catalyzed by policies, car companies accelerated the launch of new products, the penetration of L2 and L2+ advanced intelligent driving functions accelerated, and NOA ushered in large-scale implementation. In particular, the Chinese market growth led the global market by a large margin.

This year, the horizon also developed by leaps and bounds.

According to the prospectus data, in terms of installed capacity in 2023, Horizon's share of the OEM market in China reached 21.3%, with an increase of 17.6%, the most significant increase. It became the largest supplier of ADAS solutions in China and the second largest in the world. It is also the only domestic company ranked among the top 5 global ADAS and AD solution providers.

Part of this motivation may stem from past achievements; the other part is undoubtedly inseparable from continuous product innovation.

According to Yu Kai, this year will be a big year for Horizon products. The company will launch Journey 6 series products, covering high, medium and low level scenarios, breaking the pattern of only a single product in the past.

As early as last year, Horizon completed the third round of iteration of the hardware architecture and launched the Nash architecture, a next-generation BPU for advanced intelligent driving.

For intelligent driving, software algorithm capabilities are also critical, and the support behind Horizon is world-class algorithm research and development capabilities. Horizon's End-to-End Large Model Algorithm Framework (UniAD) won the top conference CVPR 2023 Best Paper. Its proposed sparse sensing framework for autonomous driving, Sparse4D, made up for the shortcomings of traditional BEV algorithms and ranked first in the NuScenes public data set ranking.

Of course, the enthusiasm of Horizon is not only reflected in the ADAS field, but also in the field of advanced autonomous driving, where it is all the rage.

According to the “2023 Market Share Report on Standard NOA Calculation Solution for Passenger Vehicle Front Installation in the Chinese Market”, the market share of 2023 Horizon increased from 30.71% to 35.5% in the high-grade NOA calculation solution market. This shows that in the context of the accelerated evolution of smart driving to a higher level, market concentration and differentiation have begun to intensify.

In fact, the implications of the autonomous driving industry's “transformation” in 2023 are also projected into the capital market -- a number of representative industrial chain companies are beginning to seize the capital market. In addition to Horizon, according to incomplete statistics, at present, more than 14 domestic related companies have announced or clearly launched listing plans, including Momenta, Wenyuan Zhixing, Tudatong, Zhijia Technology, Youjiao Innovation, Saimu Technology, etc.

China's intelligent driving industry breakthrough war has begun, and the horizon has taken the lead. Can it gain more share in the future and continue to surprise us? Who else can stand out from the latecomers? Keep watching.