Last Update 07 Jan 26

Fair value Increased 0.78%

HSAI: Outperform Initiation Signals Confidence In Future Lidar Demand Trajectory

Analysts have lifted their price target on Hesai Group by about $0.23, citing refreshed assumptions around fair value, discount rate, revenue growth, profit margin and future P/E after recent Street research, including a new Outperform initiation with a $23.50 target.

Analyst Commentary

Analysts highlighting the new Outperform initiation and US$23.50 target are framing their views around how current assumptions on fair value, discount rate, revenue growth, profit margin and future P/E stack up against execution risks.

Bullish Takeaways

Bullish analysts see the US$23.50 target as supported by refreshed fair value work, suggesting that current pricing may not fully reflect their base case on revenue growth and margins.
The Outperform stance signals confidence that Hesai can deliver on revenue growth assumptions embedded in the target. This feeds directly into the earnings and P/E profile used in the model.
Supportive views point to profit margin assumptions that, in their opinion, are achievable if Hesai manages costs and mix as planned. This is a key driver of their valuation range.
Some bullish analysts are comfortable with the discount rate applied and argue that it reasonably reflects perceived risk in the business without being overly conservative.

Bearish Takeaways

Bearish analysts focus on execution risk around the revenue growth assumptions used to justify the US$23.50 target and question whether the company can consistently hit those levels.
There is caution that profit margin expectations may be tight, leaving less room for error if input costs, pricing, or competitive pressure do not align with current modeling.
Skeptical views flag that the future P/E implied by the target could be demanding if earnings do not track the projected path, which could limit upside if sentiment weakens.
Some bearish analysts argue that the discount rate assumptions may not fully capture business and sector risk. In their view, this could put pressure on the fair value estimate if revised later.

What's in the News

Hesai Technology plans to expand annual production capacity in 2026 from 2 million units to more than 4 million units, supported by in-house manufacturing, an integrated R&D and production center, proprietary ASICs, and a new factory in Bangkok expected to begin operations in early 2027 (Key Developments).
The company provided revenue guidance for Q4 2025, expecting net revenues between RMB 1,000 million (US$140 million) and RMB 1,200 million (US$169 million), with an indicated year over year increase of about 39% to 67% (Key Developments).
Hesai raised full year 2025 GAAP net income guidance to a range of RMB 350 million (US$49 million) to RMB 450 million (US$63 million) (Key Developments).
Hesai was selected by NVIDIA as a lidar partner for the NVIDIA DRIVE AGX Hyperion 10 reference compute and sensor architecture designed for level 4 ready vehicles, joining a broader sensor ecosystem that includes cameras, radar, lidar and ultrasonic technologies (Key Developments).
The company entered multiple client partnerships, including supplying lidar for all models in Li Auto's next generation assisted driving platform, supporting Keeta Drone's low altitude logistics drones with FTX lidar, and providing JT128 lidar to MOVIN for real time motion capture systems (Key Developments).

Valuation Changes

Fair Value: Adjusted slightly from 29.83 to 30.06, reflecting a modest change in the underlying valuation model.
Discount Rate: Tweaked from 8.85% to 8.82%, indicating a small shift in how risk is being quantified in the assumptions.
Revenue Growth: Updated from 38.56% to 39.42%, showing a minor change in the projected top line growth used in the analysis.
Net Profit Margin: Refined from 19.90% to 19.49%, suggesting slightly different expectations for profitability in the modeling.
Future P/E: Kept broadly in line, moving from 27.58x to 27.59x, so the multiple underpinning the target remains largely unchanged.

Expanding global presence and design wins, including with a top European OEM, could significantly diversify and boost revenue streams.
Increasing LiDAR adoption in EVs and robotics could enhance market share and revenue growth, driven by anticipated shifts in demand dynamics.
Heavy reliance on major clients and expansion in emerging markets may strain finances, risking profit margins and revenue growth amidst competitive pricing and CapEx demands.

Catalysts

About Hesai Group

Through with its subsidiaries, engages in the development, manufacture, and sale of three-dimensional light detection and ranging solutions (LiDAR) in Mainland China, Europe, North America, and internationally.What are the underlying business or industry changes driving this perspective?

The projection of 2025 LiDAR shipments reaching 1.2 million to 1.5 million units, with nearly 200,000 high-margin robotic LiDAR units, is expected to significantly boost revenue.
Anticipated net revenues of RMB 3 billion to RMB 3.5 billion for 2025, driven by strong demand and mass market adoption, indicate potential growth in revenue.
The growth of the ADAS market and LiDAR adoption in EVs is expected to rise from 8% in 2023 to 20% in 2025 and 56% by 2030, potentially increasing future revenue and market share.
Expanding into the global market with new design wins, including a top European OEM, highlights the company's growing international presence and potential revenue diversification.
Continued robotics market penetration, including partnerships for robotic applications and the successful launch of the JT Mini LiDAR, could have a substantial positive impact on earnings.

Hesai Group Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Hesai Group's revenue will grow by 44.3% annually over the next 3 years.
Analysts assume that profit margins will increase from 4.1% today to 17.3% in 3 years time.
Analysts expect earnings to reach CN¥1.3 billion (and earnings per share of CN¥9.57) by about September 2028, up from CN¥103.1 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as CN¥685.3 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 28.4x on those 2028 earnings, down from 237.7x today. This future PE is greater than the current PE for the US Auto Components industry at 17.3x.
Analysts expect the number of shares outstanding to grow by 2.29% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.43%, as per the Simply Wall St company report.

Hesai Group Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The competitive pricing strategy, particularly with the ATX LiDAR being priced at approximately $200, may lead to pressure on profit margins if it becomes difficult to maintain efficiencies or if raw material costs increase, potentially impacting net margins.
Dependency on core clients like BYD, Li Auto, and Leapmotor for substantial revenue could pose risks if these clients shift suppliers or reduce orders due to strategic changes, potentially affecting future revenues.
The expansion into robotic LiDAR applications means tapping into markets that are still emerging, posing a risk of slower-than-anticipated adoption rates, which could delay expected revenue growth in new segments.
Overseas market expansion, particularly in regions like Europe with slower electrification rates, may face unforeseen regulatory or competitive hurdles, which could slow revenue diversification and impact overall earnings.
The ambitious production capacity expansion plan, requiring significant CapEx investments, may strain financial resources if expected demand does not materialize, affecting cash flow and potentially putting pressure on financial growth projections.

Valuation

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

The analysts have a consensus price target of $28.491 for Hesai Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $37.1, and the most bearish reporting a price target of just $24.03.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CN¥7.5 billion, earnings will come to CN¥1.3 billion, and it would be trading on a PE ratio of 28.4x, assuming you use a discount rate of 8.4%.
Given the current share price of $25.84, the analyst price target of $28.49 is 9.3% 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.

Have other thoughts on Hesai Group?

Create your own narrative on this stock, and estimate its Fair Value using our Valuator tool.

Create Narrative

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

HSAI: Global Demand For ADAS Technology Will Drive Long-Term Upside