人工智能先驱，驱动于智能驾驶舱功能

AI pioneer powered by smart cockpit capabilities Initiatewith BUY.PATEO CONNECT Technology(Shanghai)(Pateo)isChina’s third-largest smart cockpit domain controller supplier, with 0.9mn-unitsales volume and a market share of 7.3% in 2024.Ithas become a marketleader in Snapdragon-and Kirin-based smart cockpit solutions amid deeppartnershipswith Qualcomm (QCOM US, NR) and Huawei.Italsoleverages its Target PriceUp/DownsideCurrent Price China AutoJi SHI, CFA(852) 3761 8728shiji@cmbi.com.hk Poisedto outperform industry growth on software capabilities,overseas expansion and improving product mix.CIC projects a CAGRof 18.4% for China’s smart cockpit revenue in 2024-29E, with China takingup about 35% of global market.We view such industry growth as solid whilewe expect Pateo’s revenue to grow much faster with the following reasons:1) Its integrated hardware-software solutions with fast technological iterationfrom working with market-leading players, such as Huaweiand Li Auto,could help Pateo winhigh-margin business from laggards; 2) It has secured Wenjing DOU, CFA(852) 6939 4751douwenjing@cmbi.com.hkAustin Liang (852) 3900 0856austinliang@cmbi.com.hk High visibilityfor revenue growth and margin liftamidnew clientwins. We estimate Pateo has securednewlifecycle orders of almost RMB15bnsince 4Q25, includinga Korean automaker, Porsche and leading ChineseNEV makers.Wethusestimate about 25% and 60% of Pateo’s hardware Shareholding Structure AI businesscould beundervalued.We project Pateo’sAI applicationrevenue tobe RMB0.7bn in FY26E and RMB1.2bn in FY27E, mainly fromAI box and AI powered data-driven insurance services.We believe thatcould be undervalued by investors. In fact, such businesses may provide apositive surprise given Pateo’s close tie with Huawei, which makes Pateo a Earnings/Valuation.WeprojectPateo’s revenue to rise 39%/65%/46%YoY to RMB3.5bn/5.8bn/8.5bn in FY25-27, respectively, largely driven by a3-year CAGR of48%for high-end domain controller sales volume and anaverage selling price CAGR of 24%. We estimate its adjusted operatingprofit (excl. share-based payment) to break even in FY26E and a net profitof RMB62mn (or adjusted net profit of RMB262mn) in FY27E, with rapidrevenue growth and margin lift.We initiate with a BUY rating and target price Source: FactSet Contents Company Overview..................................................................................3 A leading smart cockpit player pioneering in-car AI application......................................3Market leader in Snapdragon-and Kirin-based smart cockpit solutions.........................6Intelligent connectivity: Supplement to better smart cockpit functions............................8 Investment Thesis..................................................................................14 Solid new orders to lift sales in FY26-27E, with high gross margin...............................14Smart cockpit ASP to rise on enhanced function needs, ADAS development..............15Pateo’s AI exposure could be undervalued...................................................................16 Financial Analysis..................................................................................18 We project a revenue CAGR of 49% for Pateo in FY24-27E........................................18Gross margin to widen on better product mix, greater economies of scale and AIapplications....................................................................................................................21SG&A andR&D ratios to decline amid fast revenue growth.........................................22 Valuation and Key Risks.......................................................................25 Initiate with BUY rating and a target price of HK$200...................................................25Key risks to our rating and target price..........................................................................26 Company Overview Aleading smart cockpit player pioneering in-car AI application Founded in2009in Shanghai,Pateo is a provider of both smart cockpit and vehicleconnectivity solutions in China’s automotive intelligence industry.It ranked No.3 in termsof shipment volume of smart cockpit domain controllers in China in 2024, according toindustry consultant CIC.Pateo has now started to explore more in-car AI related Pateo launched China's first 3G-based vehicle connectivity system in 2010, establishingearly market presence in connectivity solutions. The company was also among the firstdevelopers of smartcockpit technologies. Unlike some competitors focusingpredominantlyon hardware components, Pateo's solutions integrate software, hardware, and cloud-basedconnectivity systems. This integrated approach could satisfy different needs from differentOEMs more easily, especially for those with weak software capabilities, in our view.Pateo’smajorcustomers include Li Auto(LI US/2015 HK, HOLD), Dongfeng Group, SAIC Group As of18 Mar2025, Pateo