The provider of advanced driver assistance systems (ADAS) and autonomous driving (AD) technology said its revenue rose 53.6% last year

Key Takeaways:

• Horizon Robotics' revenue rose 53.6% last year, as its gross margin jumped nearly 7 percentage points to 77.3% on its shifting product mix
• The company forecasts cumulative shipments of its Journey series processing hardware will exceed 10 million units this year

In the race for investor attention from an increasingly crowded field of Chinese smart vehicle technology providers, Horizon Robotics (9660.HK) is rapidly pulling ahead, powered by its latest cutting-edge products and enviable margins.

That company's gross margin, which approached 80% last year, along with a start of mass production for its latest advanced product, were key highlights in the company's inaugural financial report for 2024, following its IPO late last December. Since that milestone event, in which it raised HK$5.4 billion ($695 million), Horizon's shares have nearly doubled from their IPO price of HK$3.99 to HK$7.59 at the end of last week.

The analyst community is also quite bullish on the company, with all 12 analysts polled by Yahoo Finance recommending the stock, including five with "strong buy" ratings. Those analysts expect the company's rise to continue this year, forecasting 58% revenue growth, fueled by the rollout of its latest cutting-edge Journey 6 processing hardware and its latest Horizon SuperDrive products, combined with the ramping up of a two-year-old partnership with Volkswagen and growth in the overall market.

"Smart vehicle transformation is a mega trend that has been reshaping the global automotive industry," Horizon Robotics said in its maiden earnings report. "We anticipate 2025 will mark a pivotal inflection point for the intelligent driving industry, as technological breakthroughs, regulatory tailwinds, and consumer readiness converge to unlock mass-market adoption of autonomous mobility."

Horizon's first post-IPO report shows it logged strong double-digit growth in all its major metrics, as its advanced driver assistance systems (ADAS) and autonomous driving (AD) solutions gained traction among car makers. The company scored design-wins for more than 100 new car models last year, bringing its cumulative total to 310 at the end of last year among more than 40 car brands.

Such design-wins are a key future growth driver for companies like Horizon, as they indicate the potential for new revenue down the road. Still, it's also important to note that a sizable portion of car designs may never get mass produced, and the ones that do will take a year or two to generate significant revenue.

That said, Horizon's pipeline of design wins was full enough to keep its business driving ahead at a brisk pace last year. The company's revenue for the year rose 53.6% to 2.38 billion yuan from 1.55 billion yuan a year earlier. It delivered 2.9 million units of its various product solutions during the year, bringing its cumulative total to 7.7 million units.

Within its revenue pie, licensing and service revenue rose by a stronger 70.9% year-on-year to 1.65 billion yuan, which was the "result of the smart vehicle industry's accelerating shift toward intelligence," the company said. Revenue from the company's product solutions grew 31% to 664 million yuan.

That growth discrepancy means that licensing and services are taking up an increasingly big portion of the company's overall revenue. That's important for Horizon, since such revenue carries far higher margins than product solutions, following a general trend whereby services typically carry higher margins than physical products.

Last year, licensing and services revenue made up nearly 70% of the company's total, up from 62% in 2023. The growing contribution from services, which are less capital intensive, helped Horizon Robotics to limit growth in its cost of sales to just 19%, which was well below its overall revenue growth.

Enviable margins

The shifting sales mix helped the company boost its gross margin to 77.3% last year, up nearly 7 percentage points from 70.5% in 2023. By comparison, smart car technology company Minieye (2431.HK) reported a gross margin of 14.1% in the first half of last year, while iMotion's (1274.HK) stood at a lowly 7.05% in the same period.

That difference shows up in the companies' differing valuations, with investors awarding Horizon Robotics a high price-to-sales (P/S) ratio of 46, more than double the 20 times for Minieye and just a 3.5 for iMotion.

Horizon offers a range of products catering to different levels of customer needs. The two most advanced are Horizon SuperDrive (HSD), and the company's Journey 6 series processing hardware, both launched last year. HSD is expected to enter mass production in the third quarter of this year, while the Journey 6 series began mass production in February. Horizon Robotics sees both products as key catalysts in driving its future growth.

The company said production of the Journey 6 series had already partnered with 20 OEM car brands by the end of last year. It added it expects the product to deliver more than 10 million units this year, which would make it China's first smart car technology company to reach that milestone.

A major customer for that product, as well as for Horizon in general, is CARIZON, a joint venture formed between the company and Volkswagen in 2023, which will become Volkswagen's main smart car technology supplier in China. The company's other customers include such big domestic names as Geely and BYD, as well as foreign companies like Hyundai.

Despite its high gross margin and fast-rising sales, Horizon is still squarely in the red due to its heavy R&D spending. Such spending rose 33% last year to 3.16 billion yuan from 2.37 billion yuan in 2023. But because its revenue rose at a faster rate, R&D spending as a percentage of revenue dropped sharply last year as the company advanced towards its goal of eventual profitability.

The company posted an adjusted operating loss of 1.5 billion yuan for 2024, narrowing from the 1.69 billion yuan loss the previous year. It managed to record its first net profit last year, though that was due to large one-time gains related to fair value changes of preferred shares and other financial liabilities. Excluding such gains, the company reported an adjusted non-IFRS loss of 1.68 billion yuan last year, roughly the same as its 1.64 billion yuan loss in 2023.