Robotaxis And ADAS Integration Will Drive Long Term Autonomous Mobility Leadership

Catalysts

About WeRide

WeRide develops and deploys advanced autonomous driving systems for robotaxis, robobuses and ADAS across global markets.

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

• Rapid global rollout of fully driverless robotaxi operations in high fare, labor constrained cities such as Abu Dhabi, Dubai and Riyadh is expected to scale high margin recurring service revenue from revenue sharing and licensing. This may materially lift total revenue and operating leverage.
• A unique dual flywheel between large scale L4 robotaxi fleets and mass market L2++ ADAS programs like WePilot 3.0 with Chery EXEED and GAC could accelerate model performance and reduce per vehicle development costs. This would support higher gross margins and faster earnings expansion.
• Deep, early regulatory trust demonstrated by city level driverless permits in Abu Dhabi, Switzerland and large Chinese cities positions WeRide as a preferred partner as governments seek safe automation. This may improve win rates on tenders and provide longer term contract visibility that stabilizes revenue and cash flow.
• Strategic integrations with global mobility platforms such as Uber and Grab create an asset light path to a larger vehicle base, allowing fleet scale and ride volumes to grow more quickly than the balance sheet and potentially driving disproportionate growth in service revenue and net margins.
• Growing demand for private, tech enabled transport and chronic driver shortages in regions like Europe and the Middle East increase the economic attractiveness of robotaxis and robobuses. This can support sustained pricing power, rising utilization per vehicle and improving unit economics that may narrow net losses and support a path toward profitability.

Assumptions

This narrative explores a more optimistic perspective on WeRide compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming WeRide's revenue will grow by 150.2% annually over the next 3 years.
• The bullish 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¥423.5 million (and earnings per share of CN¥1.01) by about December 2028, up from CN¥-1.7 billion today.
• 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 172.4x on those 2028 earnings, up from -12.0x today. This future PE is greater than the current PE for the US Auto Components industry at 19.4x.
• The bullish 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 8.8%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Despite strong top line growth, WeRide still carries a substantial net loss and rising adjusted net loss driven by heavy R&D and global expansion. If unit economics in key markets like Abu Dhabi and China take longer than expected to reach sustained profitability, mounting operating expenses could delay or prevent a clear path to positive earnings and net margins.
• The Abu Dhabi model is central to management's long-term vision. However, replication in other cities depends on regulators granting city level driverless permits and maintaining favorable policies. Any regulatory setbacks, slower approvals or more stringent safety requirements in China, Europe or the Middle East could cap fleet scale, suppress ride volumes and constrain revenue growth.
• Management highlights a first mover edge in L4 plus L2++ systems, but global OEMs and ride hailing platforms are rapidly investing in their own autonomous stacks and data infrastructure. Over time, intensified competition or OEMs insourcing technology could compress pricing power on vehicle sales, licensing and revenue share, which would pressure both revenue and gross margins.
• The strategy hinges on high utilization targets of more than 20 to 25 trips per vehicle per day across many cities. However, demand for robotaxis may prove uneven outside a few dense, high fare markets. Any shortfall in rider adoption, price sensitivity or macro driven mobility slowdowns could leave fleets underutilized, limiting recurring service revenue and dragging on earnings.
• WeRide's heavy dependence on a few large partners such as Uber, Grab, SBB and major Chinese OEMs concentrates counterparty risk. Changes in these partners' strategic priorities, bargaining power or financial health over the long term could lead to less favorable revenue share terms, lower licensing volumes or contract non renewal, negatively impacting revenue visibility and long run net margins.

Valuation

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

• The assumed bullish price target for WeRide is $19.2, which represents up to two standard deviations above the consensus price target of $15.37. This valuation is based on what can be assumed as the expectations of WeRide'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 $19.2, and the most bearish reporting a price target of just $12.02.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be CN¥8.0 billion, earnings will come to CN¥423.5 million, and it would be trading on a PE ratio of 172.4x, assuming you use a discount rate of 8.8%.
  
• Given the current share price of $8.45, the analyst price target of $19.2 is 56.0% 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.