禾赛科技：短期盈利能力受增量运营成本影响；关注新业务贡献

ST profitability impacted by incremental Reiterate Rating:BUY| PO:211.00 HKD| Price:174.20 HKD 1Q26core profit dragged by new business OPEX 20 May 2026 Hesai reported 1Q26 results and hosted a conference call. Revenue came in atRMB681mn, up 30% YoY but down 32% QoQ. Gross margin was 39.1%, down 2.6pptYoY and 1.9ppt QoQ. 1Q26 operating loss narrowed to RMB9mn from RMB33mn in1Q25, while 1Q26 net income reached RMB18mn, mainly supported by non-operatinggains. Hesai also refined its reporting structure starting this quarter: 1) LiDAR reportedoperating income of RMB42mn, and 2) strategic growth initiatives (SGI), includingKosmo and actuator modules, recorded a loss of RMB50mn (OPEX only, zero revenue Equity (CNY)PreviousCurrent2026E EPS3.243.272027E EPS6.446.302028E EPS7.717.582026E EBITDA (m)527.8521.22027E EBITDA (m)1,047.01,023.42028E EBITDA (m)1,297.71,277.2 Concrete contributionfrom new business emerging soon Management guided for SGI revenue of RMB100mn/500mn in 2026/2027, withcontribution starting from 2Q26. ASP and margins may not be representative at theinitialstage but are expected to exceed those of the LiDAR business as product maturityimproves and volumes ramp up. OPEX for SGI could likely exceed RMB200mn in FY26 Jessie Lo>>Research AnalystMerrill Lynch (Singapore)+65 6678 1134 Ming Hsun Lee, CFA>>Research AnalystMerrill Lynch (Hong Kong)+852 3508 5006 ADAS: collaboration with Benz level up Hesai confirmed its role as a strategic partner and supplier for Mercedes-Benz modelssupporting L3 autonomy. The new agreement implies broader model coverage andincreased LiDAR shipment, supported by its newly built Thailand plant. Other highlightsinclude 1) securing orders from Xiaomi for overseas models, 2) first entry into aJapanese OEM via GAC Toyota (bZ3X), and 3) multiple wins with brands under Geely, minghsun.lee@bofa.comJoey Yang, CFA>>Research AnalystMerrill Lynch (Hong Kong)+852 3508 4021 Fiona Liang>>Research AnalystMerrill Lynch (Hong Kong)+852 3508 4390 Tweak 2026 forecast, reiterate Buy Looking ahead to2Q26, revenue is guided at RMB850-900mn (+20-27% YoY). Wemaintain our FY26 forecast largely unchanged, while trimming 2027E earnings to reflecthigher-than-expected OPEX for business expansion. Progress on SGI remains a keydriver for share price performance in our view. Reiterate Buy. Our POs remain BofA Securities does and seeks to do business with issuers covered in its researchreports. As a result, investors should be aware that the firm may have aconflict ofinterest that could affect the objectivity of this report. Investors should consider thisreport as only a single factor in making their investment decision. Refer to important disclosures on page 8 to 11. Analyst Certification on page 5. PriceObjective Basis/Risk on page 5. iQprofileSMHesai Company SectorAuto Parts Company Description Hesai, set up in 2014, is a global leader in LiDAR, whichgenerates high-solution 3D image. By industries, Hesai'sproduct lines and revenue could be divided into: 1) ADAS -applied in passenger/commercial vehicle, 2) autonomousmobility (robotaxi) - autonomous vehicles that provide Investment Rationale We have a Buy rating on Hesai. We expect its shipment tosee strong demand growth as 1) the cost/price continue tocome down, 2) L3 ADAS regulation further evolves in China,3) growing robotic application (lawn mower, cleaning,logistic robots, etc). Besides, Hesai plans to tap into newbusiness through integration of different sensing Shares / ADR1.00Price to Book Value2.0x Key Metrics * For full definitions ofiQmethodSMmeasures, see page 7. Earnings review and revisions Price objective basis & risk Hesai (XHGZF / HSAI) We derive our PO of USD27 / HKD211 per share for Hesai by using the average of DCFand EV/sales valuation methods. DCF methodology: The fair value of USD27 is derived from our DCF calculation, as weraise our mid-term sales growth, profitability, FCF thanks to the potentials on newbusiness related to new sensing technology and AI. Other key assumptions are: 3.5%FCF perpetuity growth and 11.8 % WACC (consist of 3% risk free rate, 12% expected EV/Sales methodology: The fair value of is derived from our EV/sales valuation, as weassign 6x EV/sales to Hesai's 2026E sales. Our 6x EV/Sales target multiple is based on30% higher than industry peers (4.6x) across lidar and automotive technology companies. We believe Hesai deserves a higher multiple considering its leading positionin the industry (market share in terms of shipment, order gain), superior profitability/CF,and stronger B/S management. Risk: client concentration, ASP/GPM downside, slower Downside risks: fierce competition in lidar, faster ASP decline which erode margin Analyst Certification I, Jessie Lo, hereby certify that the views expressed in this research report accuratelyreflect my personal views about the subject securities and issuers. I also certify that nopart of my compensation was, is, or will be, directly or