UBS has issued a research report initiating coverage on Momenta-W (ASX: 06880), the largest supplier of autonomous driving software in China based on OEM coverage, with a "Buy" rating and a target price of HK$360.

The bank believes that Momenta's technology and scale position it as a natural partner for leading domestic and global automakers, helping to accelerate the transition to the autonomous driving era.

Despite facing competition, profitability, and regulatory risks, the firm's capital-light business model, coupled with strong revenue growth, is expected to provide operational leverage to generate high profit margins, thereby supporting a higher price-to-sales (P/S) valuation.

UBS notes that with rapid technological upgrades and declining costs, the penetration of L2+ advanced driver-assistance systems (ADAS) is accelerating across vehicle price segments and is increasingly becoming a standard feature for competitive models.

The bank expects Momenta to be a primary beneficiary of the L2+ ADAS trend, with its annual installations forecast to grow from 51,000 units in 2025 to 2.5 million units in 2028, increasing its share of annual Chinese vehicle sales from below 2% to 10%.

Driven by expanding automaker partnerships, rising vehicle installations, and the development of its Robotaxi and Robovan businesses, UBS predicts Momenta's revenue will achieve a compound annual growth rate of approximately 50% from 2025 to 2030 and expects the company to reach breakeven by 2028.