Daiwa is bullish on Hesai Group (HSAI.US), with a target price of US$35.

Daiwa Securities, Japan's second-largest securities firm and investment bank, initiates coverage on Hesai Group (HSAI.US) with a "buy" rating and a target price of $35, indicating significant upside potential from the current share price. As of March 11, Hesai Group's stock price soared 50.41% to close at $24.08, reflecting strong market confidence in its prospects.

The report notes that Hesai Group is the third-largest LiDAR manufacturer in China (by shipments), with a 26% market share in 2024. The company drives LiDAR product upgrades through its self-developed ASIC architecture and noise tolerance technology, ranking first in the number of global LiDAR patent applications. Daiwa Securities expects a CAGR of 78% from 2024 to 2027.

Daiwa Securities believes that as LiDAR chip technology continues to break through and shipments grow rapidly, Hesai Group's gross margin is expected to improve from 2024 to 2027, mainly due to the expected faster decline in production costs than the average selling price (ASP). The company has focused on chip-based LiDAR technology since 2017, enabling cost optimization potential similar to the "Moore's Law" in the semiconductor industry.

In addition, the company has secured multiple orders from mainstream carmakers in the ADAS (Advanced Driver Assistance Systems) field, including Changan, Qirui, Li Auto, Xiaomi, Geely, and SAIC Volkswagen, and is expected to have a China ADAS LiDAR market share of over 30% in 2025-2027.

Daiwa Securities says that with its technological leadership and market share advantages, Hesai Group has long-term growth potential and is bullish on its future performance.