Huachuang Securities has issued a research report on Hesai-W (02525) following its Q1 2026 results, maintaining a 'Strong Buy' rating and a target price of HK$249.39.

The company reported Q1 2026 revenue of 681 million yuan and net profit of 18 million yuan. Based on new business growth plans, Huachuang Securities forecasts for 2026-2028 are: 1) Revenue of 4.275 billion, 5.669 billion, and 7.409 billion yuan (previous estimates: 4.273B, 5.635B, 7.186B yuan), representing year-over-year growth of 41%, 33%, and 31% respectively. 2) Net profit of 501 million, 820 million, and 1.162 billion yuan (previous estimates: 510M, 817M, 1.131B yuan), representing YoY growth of 15%, 64%, and 42%. 3) Applying an 8x price-to-sales ratio for 2026, this yields a target market capitalization of 34.2 billion yuan and a target price of HK$249.39 per share.

Key points from the report are as follows:

**Q1 LiDAR Operating Profit at 42 Million Yuan; Increased R&D Investment in SGI Business** Hesai's Q1 2026 revenue reached 681 million yuan, up 30% year-over-year, meeting expectations. LiDAR shipments totaled 470,000 units, a 141% increase YoY. This included 350,000 ADAS LiDAR units (up 142% YoY) and 120,000 robotic LiDAR units (up 138% YoY). The gross margin for the quarter was 39.09%, primarily affected by a higher revenue contribution from products with lower margins. Net profit was 18 million yuan, turning profitable year-over-year, with the LiDAR business generating an operating profit of 42 million yuan. Management and sales expenses were 53 million and 42 million yuan, down 2.4% and 18% respectively. R&D expenses increased by 12% to 205 million yuan, mainly due to increased investment in the Strategic Growth Initiatives (SGI) business. The company anticipates Q2 2026 revenue to be between 850 and 900 million yuan, representing growth of 20% to 27% year-over-year.

**Dominant Position in Main LiDAR Market Solidifies; Globalization Strategy Accelerates** According to Gasgoo Research Institute data, Hesai held a 55% share of the LiDAR installation market for passenger vehicles in China in March 2026, maintaining its position as the industry leader for 14 consecutive months. Regarding global expansion, the company has officially announced becoming a strategic LiDAR partner and supplier for Level 3 autonomous driving models for Mercedes-Benz, covering models for the European and Chinese markets. Related products will be produced at the 'Galileo' factory in Thailand. Additionally, Hesai has secured designations for multiple overseas models from Xiaomi, with mass production expected in 2027. The 2026 GAC Toyota bZ3X is equipped with Hesai LiDAR, marking the company's first entry into the Japanese brand system. Furthermore, the company announced securing a new designation from another top-tier European automaker following Mercedes-Benz, with an order scale exceeding 1 million units covering over ten models under its Chinese joint venture brands.

**Robotic LiDAR as a Second Growth Engine Shows Sustained Potential** In the field of embodied intelligence, Hesai's JT128 LiDAR assisted the Honor Flash humanoid robot in winning the world's first humanoid robot half-marathon and breaking the human world record for a half-marathon. In the unmanned delivery sector, Hesai secured an exclusive designation from Jiushi to supply 200,000 LiDAR units and continues to be the largest LiDAR supplier for Neolix. In the two-wheel mobility sector, Hesai has formed a strategic partnership with Niu Technologies, with its pure solid-state blind spot LiDAR, the FTX, receiving a designation for a new model, aiming to enhance riding safety through improved perception.

**New SGI Business Expected to Contribute 100 Million Yuan in Revenue for 2026** Hesai has for the first time segmented its business into two main divisions: LiDAR and Strategic Growth Initiatives (SGI). The company expects the SGI business to begin generating revenue in Q2 2026 and forecasts it will contribute approximately 100 million yuan in revenue for the full year 2026. The company's revolutionary new spatial intelligence product, Kosmo, integrates the structural perception capabilities of LiDAR with the rich color and texture perception of cameras. Combined with spatial perception and AIGC algorithms, it can efficiently complete 3D scene reconstruction of real environments, making 3D capture compact and portable. Kosmo has already received its first orders and is expected to be officially launched in the second half of 2026. It aims to build a new, scalable commercial ecosystem around hardware, AI software, spatial data, and platform services, potentially unlocking a trillion-yuan downstream market in areas such as robot simulation training, immersive media, and 4D entertainment.

**Risk Factors:** Slower-than-expected adoption of LiDAR; slower-than-expected progress in new businesses; geopolitical uncertainties.