Declining Automotive LiDAR Sales Will Deepen Margin Struggles

Key Takeaways

• Heavy reliance on a few OEM customers and shifts away from LiDAR threaten revenue stability and increase earnings volatility.
  
• Price erosion, high R&D spend, and rising competition from alternative technologies pressure both margins and future growth potential.
  
• Successful diversification beyond automotive and disciplined cost controls have driven margin improvements and revenue resilience, positioning Robosense for stronger long-term profitability and multi-industry growth.

Catalysts

An investment holding company, provides LiDAR and perception solutions in the People’s Republic of China, the United States, and internationally.

• Robosense's core automotive LiDAR business is showing declining unit volumes as sales to two major OEM customers dropped sharply in the first half of 2025, one switching to a strategic supplier and the other ceasing to use LiDAR altogether, which highlights a vulnerability to rapid shifts in customer adoption and threatens long-term revenue stability.
  
• The average selling price for both ADAS and robotics LiDAR products is decreasing significantly year over year due to a mix shift toward lower-priced offerings and intensifying industry-wide price erosion, suggesting that gross margins are likely to come under sustained future pressure as commoditization accelerates.
  
• Despite rapid growth in robotics LiDAR sales and solution revenues, Robosense remains heavily reliant on the uncertain pace of mass-market autonomous vehicles; should regulatory scrutiny on AV safety continue to intensify globally, further delays in adoption could constrict the company's total addressable market and dampen multi-year revenue growth expectations.
  
• High levels of R&D spend are not being matched by proportionate growth at the top line, and as large-scale cost pressures such as needing to expand R&D staff persist, operating margins and net earnings may remain deeply negative, limiting the company's ability to turn gross profit improvements into actual profitability.
  
• The risk of further customer concentration remains acute, and as sensor fusion and alternative perception technologies such as camera-radar hybrids gain favor among OEMs, Robosense's LiDAR offerings face a shrinking share of future vehicle architectures, ultimately impacting long-term revenue growth and potentially resulting in further abrupt contract losses and earnings volatility.

Robosense Technology Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

• This narrative explores a more pessimistic perspective on Robosense Technology compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Robosense Technology's revenue will grow by 39.6% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from -7.5% today to 8.4% in 3 years time.
• The bearish analysts expect earnings to reach CN¥440.6 million (and earnings per share of CN¥0.97) by about May 2029, up from -CN¥145.9 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as CN¥1.2 billion.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 54.8x on those 2029 earnings, up from -92.6x today. This future PE is greater than the current PE for the HK Electronic industry at 14.9x.
• The bearish analysts expect the number of shares outstanding to grow by 5.06% 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

• Robosense Technology achieved a 7.7% increase in total revenue year-on-year and significantly improved gross margins from 13.6% to 25.9%, which, if sustained, could lead to improved profitability and enhanced earnings in the long term.
  
• The company reported an explosive 184.8% growth in revenues from the robotics and non-ADAS segment, with unit volume for these products jumping more than fivefold, indicating successful diversification beyond automotive and the potential for robust multi-year revenue streams.
  
• Despite a sharp drop in ADAS lidar sales to two major OEMs, Robosense partially offset this by gaining increased sales to two other major OEM customers in China, reducing near-term concentration risk and pointing to ongoing resilience in its customer relationships which supports sales stability.
  
• Strategic cost reductions through lower raw material procurement costs and the adoption of in-house developed SOC processing chips have substantially improved gross margins on key product lines, which bodes well for future net margins and operating leverage.
  
• Operating expenses, such as R&D, sales and marketing, and G&A, have been held in check or reduced as a percentage of revenue, signaling discipline and operating efficiency that could translate into better operating margins and improved bottom line results as scale continues to grow.

Valuation

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

• The assumed bearish price target for Robosense Technology is HK$39.31, which represents up to two standard deviations below the consensus price target of HK$46.87. This valuation is based on what can be assumed as the expectations of Robosense Technology's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of HK$56.9, and the most bearish reporting a price target of just HK$39.31.
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2029, revenues will be CN¥5.3 billion, earnings will come to CN¥440.6 million, and it would be trading on a PE ratio of 54.8x, assuming you use a discount rate of 8.8%.
• Given the current share price of HK$32.82, the analyst price target of HK$39.31 is 16.5% 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.