Horizon Robotics Debuts Strongly, Fueled By Autonomous Driving Boom

Key Takeaways:

• Horizon Robotics raised HK$5.41 billion in its Hong Kong IPO, valuing the company at HK$53.4 billion
• The company’s revenue grew 152% in the first half of the year, and it expects its recently formed joint venture with Volkswagen to further drive growth

By Doug Young

Growing consumer comfort with autonomous driving as the technology improves is fueling a surge in related IPOs, as companies rush to seize on the positive momentum. One of those, Horizon Robotics, has become the latest to join the wave with a major new Hong Kong listing, delivering an enticing story that has excited investors with its strong revenue growth and impressive margins.

The company, which says it aims to “empower passenger vehicles with advanced smart driving solutions,” made its trading debut on the Hong Kong Stock Exchange last Thursday, raising a sizable HK$5.41 billion ($696 million), valuing it at HK$53.4 billion. Its shares opened 28% higher from their IPO price of HK$3.99 at HK$5.12 on their first trading day and closed at HK$4.10 at the end of the day.

With nearly a decade of experience in the young but fast-moving autonomous driving sector, Horizon boasts an A-list of investors that includes Hillhouse Capital and 5Y Capital. It gained a major vote of confidence from the investment community late last year when Volkswagen agreed to pump a combined 2.4 billion euros ($2.6 billion) into both Horizon and also CARIZON, a new joint venture between the pair.

That partnership has lit a fire under Horizon’s top line revenue, which logged triple-digit growth in the first half of this year, reflecting the company’s ability to quickly contribute to the Volkswagen partnership. The joint venture will become the main autonomous driving technology supplier to VW’s China operations.

Founded in 2015, Horizon is led by Chairman and CEO Yu Kai, a machine learning expert and well-known figure in the deep learning technology used by the smart vehicle sector. The company says it was the first in China to mass produce advanced driver assistance systems (ADAS) and autonomous driving (AD) solutions for passenger vehicles that make driving safer, more convenient and more comfortable.

“We take a software and hardware co-optimization approach, which we believe is crucial in ensuring optimal processing efficiency at affordable costs, hence the right technological path towards an autonomous driving future,” the company explained in its prospectus.

The company highlights its open and collaborative approach that lets its partners accelerate the mass adoption of smart driving solutions, which it says differentiates it from its rivals. Its solutions have been chosen by 42 OEM brands for use in 290 car models, giving customers the flexibility to choose any of its range of offerings.

The prospectus notes that ADAS technology has currently penetrated over half the global auto market, citing research from consultancy CIC. Nearly all the mass-produced technology now on the road is at Level 2, or L2, on an autonomous driving scale of L0 to L5, where L0 represents no autonomous driving assistance and L5 is fully autonomous.

Horizon offers products from three major series catering to different levels of customer needs, starting with its Horizon Mono products at the most basic level, and ranging up to its most advanced Horizon SuperDrive, which launched this year and is expected to start mass production in 2026. Its customers include domestic giants like Geely and BYD, as well as foreign names like Volkswagen and Hyundai.

CIC estimates the global market for ADAS and AD technology was worth a relatively modest 61.9 billion yuan ($8.75 billion) last year. But it expects the market to grow at a lightning pace of nearly 50% annually over the next six years to reach 1 trillion yuan by 2030.

Horizon Robotics, which offers both autonomous driving hardware and software, is looking to capture a slice of that market, boasting revenue that’s growing well ahead of the industry average. Its revenue rose 71% last year to cross the billion-yuan threshold at 1.55 billion yuan. The growth accelerated into triple digits in the first half of this year, rising by 152% to 935 million yuan for the sixth-month period from 372 million yuan a year earlier.

VW Venture To Drive Future Growth

While the VW joint venture provided Horizon with 352 million yuan in revenue in the first half of the year, the venture more importantly looks likely to become an even bigger growth engine in the future. That’s because VW has earmarked the venture as its main autonomous driving technology provider in China, one of its largest global markets with 3.2 million vehicles sold there last year.

Horizon has maintained its gross margin at close to 70% or more since 2021, allowing it to boost its gross profit to 738.7 million yuan in the first half of this year from 226.6 million yuan a year ago. Significantly, Horizon’s licensing and services business, which counts the joint venture as a major customer, is driving revenue growth and carries far higher margins than the company’s other category for product solutions.

Horizon has been spending heavily on R&D, done by a team of nearly 1,700 employees who account for 73% of its headcount. Such spending equaled 152% of its revenue in the first half of the year. But its losses are narrowing as it gains scale, with its adjusted loss, which excludes many non-operational factors, narrowing to 1.64 billion yuan in 2023 from 1.89 billion yuan a year earlier.

With its status as one of the early members in its field, combined with strong validation from Volkswagen, the company presents a rapid growth prospect that is likely to keep attracting investors as the autonomous driving boom continues.

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.