Hesai Zooms Ahead In Third Quarter, Setting Stage For Milestone Year

Key Takeaways:

• Hesai’s third quarter revenue rose 21.1% year-on-year to 540 million yuan ($76.9 million), surpassing the top end of its earlier guidance.
• The company could generate $100 million in fourth-quarter revenue and achieve non-GAAP profitability for 2024, hoping it can become the first profitable automotive LiDAR firm

By Teri Yu

In the fast-evolving and highly competitive autonomous driving sensor technology market, Hesai Group HSAI is driving ahead with rapid growth and a clear path toward profitability. As the world’s largest supplier of light detection and ranging (LiDAR) technology for automotive and robotic applications, Hesai is capitalizing on its market leadership to advance the mainstream adoption of autonomous and assisted driving technologies and position itself as a sustainable business in the long term.

The company’s third-quarter results, released Tuesday, showcased strong double-digit revenue growth of 21% year-on-year to 540 million yuan ($76.9 million), up from 445.6 million yuan a year earlier, driven by surging demand for its advanced driver assistance system (ADAS) LiDAR products in China. Even more notable, Hesai’s shipments soared 183% year-on-year in the latest quarter as the company ramps up partnerships with global automotive giants.

“We are thrilled to share that our business continues to thrive and advance on a strong growth path,” said David Li, Hesai’s co-founder and CEO. “This quarter, we have made significant strides in the ADAS market, securing new design wins, partnerships, and development programs with key players.”

Hesai’s growth story hinges on its ability to combine technical innovation with operational efficiency. Its ADAS LiDAR shipments reached 134,208 units in the third quarter, marking its second consecutive quarter of nearly 50% sequential growth and an increase of 183% year-on-year. Its ADAS LiDAR shipments accounted for 97% of that total, more than tripling to 129,913.

Achieving economies of scale has become one of the biggest challenges for autonomous driving sensor technology companies, which must compete with numerous rivals to convince car makers to use their products in mass-produced models. Hesai is on the road to meeting that goal, and has halved its losses to 70.4 million yuan in the latest quarter from 141.8 million yuan a year earlier.

The company’s stock jumped 44% on Tuesday after the announcement.

The race to dominance in the global LiDAR market depends largely on who can partner with the most carmakers, often new energy vehicle (NEV) brands. On that front, Hesai boasts a roster of leading Chinese clients like Li Auto, Baidu and Geely. Its roster of partners expanded further in the third quarter to include SAIC Volkswagen, Leapmotor, a premium EV brand backed by a leading Chinese automotive group, and one of Japan’s top-three OEMs, setting the stage for future growth outside its home market.

Hesai is already a dominant automotive LiDAR supplier globally with 37% market share, according to Yole Intelligence. It made additional progress during the quarter on this front by delivering sample products to a leading automotive OEM. The company is also a global leader in Level 4 (L4) autonomous driving LiDAR, which represents near-fully autonomous driving, with 74% market share and nine out of the 10 leading autonomous driving companies from that segment using its products. International sales beyond China account for nearly half of Hesai’s revenue with over 47% of sales from international clients last year.

$100 Million Revenue Milestone

As Hesai continues to make strong progress, the company is targeting $100 million in revenue for the current quarter, powered by a projected 200,000-unit shipment milestone, which is equivalent to its total shipments in the entire previous year. Hesai is also on the brink of another major milestone, forecasting a net profit of $20 million and positive operating cash flow in the fourth quarter, which would secure full-year profitability on a non-GAAP basis. Such a milestone could pave the way for sustained profitability and growth, a rare achievement in the automotive LiDAR industry.

“This anticipated explosive growth underscores our momentum as we drive toward a landmark fiscal year finish, positioning us as the first autonomous LiDAR company worldwide to achieve this remarkable milestone,” said Andrew Fan, Hesai’s newly appointed CFO.

Hesai is riding the crest of a booming global autonomous driving market that’s projected to grow from $1.92 trillion in 2023 to $13.63 trillion by 2030, according to Fortune Business Insights.

The company’s LiDAR systems, which use light to gauge the location of objects in ADAS-equipped and self-driving cars, are already being used in a wide range of vehicles from robotaxis to consumer electric vehicles (EVs) and even robotrucks and robo-sweepers.

China is leading the global push for autonomous driving technology with pilot programs across the country already in operation or in planning. For its latest initiative launched in June, the central government selected 20 cities to participate in a pilot program aimed at developing cutting-edge roadside infrastructure and a cloud-based control platform for smart connected vehicles. Most of China’s leading autonomous driving companies are using Hesai technology to pursue their goals, including Baidu Apollo, AutoX, and WeRide.

Outperforming Industry Metrics

While the global autonomous market is crowded, Hesai outperforms most of its domestic and global peers in terms of key metrics like revenue, gross margin, cash flow and cash reserves, by pairing technical innovation with cost controls.

Even so, the stock trades at a relatively low price-to-sales (P/S) ratio of 2.39 — a significant discount compared to competitors RoboSense at 4.63 and Luminar at 3.63.

Analysts are largely positive about Hesai’s ability to expand globally and further improve its financials as it secures more mass production partnerships with both Chinese and international automakers. The company’s in-house manufacturing and R&D integration, along with its proprietary technology, are also considered competitive advantages.

Investors appear positive, too, with seven of eight analysts surveyed by Yahoo Finance now rating the company a “buy” or “strong buy,” suggesting they believe the stock is undervalued.

Established in Silicon Valley in 2014, Hesai quickly gained recognition for its product performance, quality and cost effectiveness, and its LiDAR products were quickly adopted by several top autonomous driving companies. It made headlines in early 2023 when its $190 million Nasdaq IPO was not only one of the largest listings by a Chinese company in New York in more than two years, but also one of the first by a Chinese autonomous driving concept company.

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