Abu Dhabi Driverless Permits And Global Licenses Will Support A Stronger Long Term Story

Catalysts

About WeRide

WeRide develops and deploys autonomous driving technology across robotaxis, robobuses, ADAS systems and other self driving applications in multiple countries.

What are the underlying business or industry changes driving this perspective?

• City level fully driverless permits in Abu Dhabi, together with integration on Uber, give WeRide a reference model for scaling similar arrangements in Dubai, Riyadh and other high fare, driver constrained cities, which could support higher ride volume and service revenue per vehicle.
• Growing adoption of ride hailing and preference for private transport in major urban centers, including Abu Dhabi, Guangzhou and Beijing, align with WeRide’s plan to lift utilization to around 25 trips per vehicle per day, which directly influences revenue density and the potential to improve net margins through better fixed cost absorption.
• The global shortage of professional drivers in regions such as Europe and parts of the Middle East, combined with relatively high taxi fares, positions WeRide’s L4 robotaxi and robobus offerings as a possible substitute for human driven fleets. This may support recurring service revenue and improve earnings stability over a 5 to 7 year vehicle life.
• The dual deployment of L4 robotaxis and L2+ WePilot 3.0 ADAS in mass production vehicles from Chery EXEED and GAC allows data and software to be reused across product lines. This can spread R&D spending over a larger revenue base and potentially support higher group level margins.
• Regulatory progress across 11 countries, including permits in Abu Dhabi, Dubai, Riyadh, Singapore, Switzerland and Belgium, creates a broader addressable base for product sales of robotaxis and robobuses and for recurring licensing and revenue share agreements, which can influence top line growth and, over time, narrow net losses.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming WeRide's revenue will grow by 136.1% annually over the next 3 years.
• Analysts are not forecasting that WeRide will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate WeRide's profit margin will increase from -330.7% to the average US Auto Components industry of 5.3% in 3 years.
• If WeRide's profit margin were to converge on the industry average, you could expect earnings to reach CN¥358.0 million (and earnings per share of CN¥0.85) by about January 2029, up from CN¥-1.7 billion today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 160.1x on those 2029 earnings, up from -13.6x today. This future PE is greater than the current PE for the US Auto Components industry at 23.2x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.78%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Autonomous driving remains heavily dependent on regulatory approvals and permits in each city and country, so any slowdown in new permits, tighter safety rules or setbacks to existing approvals in places like Abu Dhabi, Dubai, Riyadh, China or Europe could cap fleet size growth and limit future revenue.
• The business model relies on high utilization, with management talking about 20 to 25 trips per vehicle per day and citywide coverage. If rider adoption, pricing, or ride hailing platform support through partners such as Uber and Grab falls short, unit economics may not reach the levels needed to support net margin improvement and earnings.
• WeRide continues to commit heavily to R&D, with R&D expenses accounting for 73% of operating expenses and adjusted net loss of RMB 276 million in the quarter. If revenue from robotaxis, robobuses and ADAS licensing does not keep pace with ongoing R&D and global expansion costs, losses could remain elevated and weigh on earnings.
• Management highlights competition from OEMs and ride hailing companies that are building their own robotaxi and advanced driver assistance capabilities. If these players successfully deploy comparable L4 or L2+ systems at scale, WeRide could face pricing pressure or lose deals, which would affect revenue growth and long term margin potential.
• The international plan depends on scaling the Abu Dhabi model into multiple high fare, driver constrained markets, including the Middle East, Europe and parts of Asia. Any change in ride hailing economics, labor availability or taxi fare levels in these regions could weaken the assumed revenue per vehicle and slow the path to improved net margins and earnings.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $15.22 for WeRide based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $19.41, and the most bearish reporting a price target of just $12.15.
  
• In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be CN¥6.7 billion, earnings will come to CN¥358.0 million, and it would be trading on a PE ratio of 160.1x, assuming you use a discount rate of 8.8%.
  
• Given the current share price of $9.64, the analyst price target of $15.22 is 36.7% 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.