HK IPO Subscription: Horizon Robotics-W IPO Analysis and Subscription Plan
Horizon Robotics is a limited company registered in the Cayman Islands, specializing in providing advanced driver-assistance systems (ADAS) and high-level autonomous driving (AD) solutions for passenger vehicles. The company offers core technological support for the transformation and commercialization of smart vehicles through its proprietary software and hardware technologies. According to data from CIC Consulting, Horizon Robotics is the first and consistently the largest provider of pre-installed mass-production ADAS and AD solutions in China.
The company's product portfolio includes Horizon Mono, Horizon Pilot, and Horizon SuperDrive, offering full-scenario functionalities from mainstream ADAS to high-level AD. These solutions integrate algorithms, specialized software, and processing hardware to enhance driving safety and experience. Horizon Robotics boasts a vast global customer base, including leading OEMs and Tier-1 suppliers in domestic automotive manufacturing.
The company's business model is flexible and scalable, providing any combination of solutions or components from its full-stack products, including algorithms, software, processing hardware, and development toolchains. This flexibility helps the company continuously acquire new customers and expand its market share. Additionally, Horizon Robotics collaborates with clients to meet customized needs through ADAS and AD solutions, significantly reducing development cycles and costs.
Horizon Robotics has achieved significant financial growth, with revenue increasing from RMB 466.7 million in 2021 to RMB 905.7 million in 2022 and further to RMB 1,551.6 million in 2023. Despite recording losses during the track record period, the company expects continued losses in the future. It plans to achieve breakeven and profitability by expanding revenue scale, maintaining gross margin levels, improving operational leverage, and enhancing joint venture operations (particularly with CoolCore).
Risks faced by the company include but are not limited to: intense market competition, heavy R&D investments, high customer concentration, supply chain risks, increased regulatory and public scrutiny, and risks related to sanctions and export control laws. Additionally, the company's dual-class share structure may lead to misalignment between the interests of beneficiaries with different voting rights and those of shareholders as a whole.
Use of Proceeds
1. R&D Purposes: Approximately 70% of the net proceeds, or about HKD 3,480.4 million, will be allocated to R&D over the next five years, including continuous innovation and technological upgrades for ADAS and AD solutions.
2. Sales and Marketing Expenses: Approximately 10% of the net proceeds, or about HKD 497.2 million, will be allocated to sales and marketing to expand market share, enhance brand awareness, and improve customer relationship management.
3. Strategic Investments: Approximately 10% of the net proceeds, or about HKD 497.2 million, will be allocated to strategic investments in joint ventures (particularly CoolCore) to broaden and strengthen the company's technological capabilities.
4. General Corporate Purposes and Working Capital: The remaining 10%, or about HKD 497.2 million, will be allocated to general corporate purposes and working capital needs, including daily operations, potential acquisitions or investments, and other general corporate uses.
The allocation of proceeds reflects Horizon Robotics' strategic focus on strengthening R&D capabilities, expanding market influence, enhancing strategic partnerships, and ensuring operational flexibility to support long-term growth and competitiveness.
IPO Details:
Pre-IPO and Cornerstone Investors:
From 2015 to 2023, the company completed 11 rounds of financing, with the Series D round in December 2023 raising a total of USD 210 million at a cost of USD 0.7415 per share (~HKD 5.76), implying a post-money valuation of USD 8.71 billion (~HKD 67.68 billion), a 30% premium to the upper limit of the IPO price. Other pre-IPO investors faced discounts (see chart below). Pre-IPO investors 5Y Capital and Hillhouse are subject to a 6-month lock-up period, retaining at least 50% of their investments at listing, while other pre-IPO investors face a 12-month lock-up.
Horizon Robotics has secured four cornerstone investors, accounting for 33.8% at the lower price, 32.6% at the mid-point, and 31.6% at the upper price, with a 6-month lock-up period.
Sponsors:
Goldman Sachs, Morgan Stanley, and CITIC Securities are joint sponsors, with Goldman Sachs as the stabilizing agent. While Morgan Stanley's recent project (Taimei Medical Technology) saw significant underperformance, Goldman Sachs and CITIC Securities' recent projects were well-received. See below for Goldman Sachs' stabilizing track record:
Financial Highlights:
Revenue:RMB 466 million in 2021, RMB 905 million in 2022, and RMB 1,551 million in 2023.
Gross Profit:RMB 331 million in 2021, RMB 628 million in 2022, and RMB 1,094 million in 2023.
Net Loss:RMB 2,063 million in 2021, RMB 8,720 million in 2022, and RMB 6,739 million in 2023.
Lottery Winning Rate:
The global offering comprises 1,355.1066 million shares, with 600 shares per lot. As of now, the oversubscription rate is 0.35x, and no clawback is expected. There are 112,925.55 lots each for Group A and B, with an estimated 5,000-15,000 participants, implying a 100% winning rate per lot.
Comprehensive Review:
Horizon Robotics is a provider ofADAS and AD solutions, with revenue primarily from automotive solutions (product solutions and licensing/services). Product solutions contributed RMB 506 million (32.7%) in 2023, while licensing/services contributed RMB 964 million (62.1%).
According to prospectus data, Horizon Robotics ranked first among China's top five ADAS solution providers for local OEMs by installations in 2023 and H1 2024.
It ranked fourth among China's top five ADAS and AD solution providers by installations in 2023 and H1 2024.
Among the four companies listed, Company A (Mobileye Global, MBLY) is the closest comparable to Horizon Robotics. MBLY currently has a market cap of HKD 78.322 billion, with 2023 revenue of RMB 14.756 billion and a loss of RMB 192 million. Horizon Robotics' IPO valuation ranges from HKD 48.601-51.989 billion, with 2023 revenue of RMB 1.551 billion and a loss of RMB 6.739 billion.
Calculating the price-to-sales (PS) ratio, Horizon Robotics' implied valuation is 6x MBLY's, which appears inflated given MBLY's 14.45% growth in 2023 versus Horizon's 71% (151% in H1 2024). Even at MBLY's peak valuation (3.86x current), Horizon's fair value would be ~HKD 36.5 billion. The current IPO pricing seems to discount 2-3 years of doubled revenue, making it overvalued for short-term trading.
Fundamentally, this tech stock is priced at a premium, contradicting short-term arbitrage principles. Recent IPOs like Black Sesame Intelligent and RoboSense have underperformed, and Horizon could easily drop 20% post-listing. With HKD 3.4 billion in free float and a lukewarm cornerstone lineup, the risk-reward is unfavorable.
Bull Rating: Bronze Bull
Rating Scale: Platinum Bull > Gold Bull > Silver Bull > Bronze Bull > Pot Bull (Platinum: all-in margin; Gold: high certainty, use margin; Silver: moderate certainty, multi-account; Bronze: volatile; Pot: avoid)
Subscription Plan:
Pass
$HORIZONROBOT-W(09660.HK)
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