Autonomous Vehicles And Smart Cities Will Expand LiDAR Adoption

Key Takeaways

• Accelerating product innovation and expanding global partnerships are driving significant margin improvement, revenue growth, and market share gains across both automotive and non-automotive segments.
  
• Hesai's advanced lidar platforms and integration into emerging sectors position it as a leading supplier for autonomous technology and recurring, high-margin international sales.
  
• Exposure to trade barriers, shifting technology trends, intense competition, high capital spending, and reliance on key customers could undermine Hesai's growth, margins, and financial stability.

Catalysts

Through with its subsidiaries, engages in the development, manufacture, and sale of three-dimensional light detection and ranging solutions (LiDAR) in Mainland China, Europe, North America, and internationally.

• Analyst consensus expects 2025 lidar shipments of 1.2 million to 1.5 million units, yet recent quarterly shipments have more than tripled year-on-year and production capacity is already set to reach 2 million units by year-end, positioning Hesai for a rapid upside surprise both in shipment volume and revenue well ahead of current forecasts.
  
• Analysts broadly project sustained 40% gross margins, but ongoing product innovation, platform commonality of component design, and exponential economies of scale from ramping ATX volumes could drive blended gross margins markedly higher, directly improving net income and leveraging operating profits as volume accelerates.
  
• The company's new Infinity Eye platform and next-generation sensors offer full-stack solutions from Level 2 through Level 4 autonomy, enabling Hesai to capture higher per-vehicle content value as advanced driver-assistance system adoption accelerates, expanding total addressable market and boosting long-term earnings power.
  
• Hesai's global expansion is underestimated: multiple proof-of-concept programs and a multi-year exclusive supply agreement with a top European OEM position the company to become the de facto lidar supplier across major global automakers as regulations mandate advanced collision avoidance and safety standards, resulting in significant international revenue diversification and recurring high-margin sales.
  
• The surge in robotics and automation-driven by urbanization, smart logistics, and the integration of LiDAR into a wide range of non-automotive products-gives Hesai a first-mover advantage in fast-growing adjacencies, making lidar a core component in consumer robotics, industrial automation, and smart infrastructure, with material long-term upside to multi-segment revenue and profit growth.

Hesai Group Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Hesai Group compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Hesai Group's revenue will grow by 52.5% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 4.1% today to 19.9% in 3 years time.
• The bullish analysts expect earnings to reach CN¥1.8 billion (and earnings per share of CN¥13.4) by about August 2028, up from CN¥103.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 26.2x on those 2028 earnings, down from 238.8x today. This future PE is greater than the current PE for the US Auto Components industry at 16.3x.
• Analysts expect the number of shares outstanding to grow by 1.94% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.41%, as per the Simply Wall St company report.

Hesai Group Future Earnings Per Share Growth

Risks

• The global lidar industry faces ongoing risks from trade tensions, tariffs, and protectionism, which could restrict Hesai's access to key international markets such as the US and Europe, raising export costs and exposing the company to volatile foreign demand, ultimately weighing on revenue growth and long-term earnings stability.
  
• Rapid technological change and possible preference for alternative sensing systems like vision
• or radar-based ADAS may slow lidar adoption in both passenger and autonomous vehicles, threatening Hesai's market share and putting downward pressure on future revenues.
  
• The lidar market remains highly competitive with aggressive pricing and contract wins by rivals such as those mentioned with Xiaomi and Leapmotor; this intensifying price competition could compress Hesai's gross and net margins over time, particularly as average selling prices for core products like ATX are expected to decline.
  
• Heavy ongoing investment in R&D, manufacturing capacity expansions, and new overseas factories may not fully align with realized demand if autonomous vehicle rollout or robotaxi commercialization is slower than anticipated, leading to rising operating expenses and capital expenditures that could squeeze net income and free cash flow.
  
• Hesai's customer base displays concentration risk, with substantial dependence on large contracts with key OEMs or robotaxi platforms; any contract loss or reduction in order volumes from major customers would likely create significant revenue and earnings volatility.

Valuation

• The assumed bullish price target for Hesai Group is $35.88, which represents two standard deviations above the consensus price target of $28.49. This valuation is based on what can be assumed as the expectations of Hesai Group's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $37.1, and the most bearish reporting a price target of just $24.03.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be CN¥8.8 billion, earnings will come to CN¥1.8 billion, and it would be trading on a PE ratio of 26.2x, assuming you use a discount rate of 8.4%.
  
• Given the current share price of $25.91, the bullish analyst price target of $35.88 is 27.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.