Blue Lotus China New Economy Research, Blue Lotus Research Institute

Eric Wen

Blue Lotus China New Economy Research

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Equity Bottom-Up

<ul>
<li>HESAI (HSAI) reported C2Q25 top line, non-GAAP operating profit and GAAP net income in-line, 143% and 6019% vs. our estimate. </li>
<li>ADS LiDAR shipment beat our estimate by 50%, growing 276% YoY and 108% QoQ; Robotic LiDAR grew 744% YoY and (2%) QoQ, beating our estimate by 32%; </li>
<li>Despite the ASP erosion, gross margin grew 2.2ppt YoY and 0.9ppt QoQ to 42.5%, missing our estimate by 0.5ppt. We reiterate our TOP BUY and raise TP to US$35.</li>
</ul>


HESAI (HSAI) reported C2Q25 top line, non-GAAP operating profit and GAAP net income in-line, 143% and 6019% vs. our estimate. 
ADS LiDAR shipment beat our estimate by 50%, growing 276% YoY and 108% QoQ; Robotic LiDAR grew 744% YoY and (2%) QoQ, beating our estimate by 32%; 
Despite the ASP erosion, gross margin grew 2.2ppt YoY and 0.9ppt QoQ to 42.5%, missing our estimate by 0.5ppt. We reiterate our TOP BUY and raise TP to US$35.


[Hesai Group (HSAI US, BUY, TP US$35) Review]: Rapid Cost Down Continued Driving Penetration

Covering IPOs, Healthcare and Technology Stocks

Andrei Zakharov

<ul>
<li>Hesai Group, one of the global leaders in the LiDAR and perception solutions market, completed its IPO in February 2023 and listed ADSs on the Nasdaq Global Select Market.</li>
<li>The stock peaked at $30+ during the first trading day and fell ~67% over the following 8 months as selling pressure intensified and investor sentiment worsened.</li>
<li>The stock has taken another leg down following U.S. DoD’s decision to include Hesai Group in 1260H list of Chinese military-linked companies. Hesai believes this inclusion is unjust and meritless.</li>
</ul>


Hesai Group, one of the global leaders in the LiDAR and perception solutions market, completed its IPO in February 2023 and listed ADSs on the Nasdaq Global Select Market.
The stock peaked at $30+ during the first trading day and fell ~67% over the following 8 months as selling pressure intensified and investor sentiment worsened.
The stock has taken another leg down following U.S. DoD’s decision to include Hesai Group in 1260H list of Chinese military-linked companies. Hesai believes this inclusion is unjust and meritless.


Hesai Group: Time To Cover Shorts As The Stock Found A Bottom and Delisting Risk Is Real

<ul>
<li>Hesai Group, a global leader in LiDAR solutions in the ADAS and robotics markets, forecasted hyper-growth and GAAP profitability for the full year of 2025.</li>
<li>The stock has bottomed in the low $4s (~0.3x 2025E EV/Revs) in 2024 and gained about 350%. Hesai Group currently trades at ~4x EV/2025E revenues, ~32% discount relative to RoboSense.</li>
<li>I believe that the market has already priced in growth acceleration (~58% y/y) scenario in 2025 along with GAAP profitability and 1M+ LiDAR shipments this year.</li>
</ul>


Hesai Group, a global leader in LiDAR solutions in the ADAS and robotics markets, forecasted hyper-growth and GAAP profitability for the full year of 2025.
The stock has bottomed in the low $4s (~0.3x 2025E EV/Revs) in 2024 and gained about 350%. Hesai Group currently trades at ~4x EV/2025E revenues, ~32% discount relative to RoboSense.
I believe that the market has already priced in growth acceleration (~58% y/y) scenario in 2025 along with GAAP profitability and 1M+ LiDAR shipments this year.


Hesai Group: Growth Acceleration Has Already Priced In While Upside May Be Limited

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>The December rebalance of the Hang Seng family of indices will use today's closing prices to cap the index constituent weights.</li>
<li>The net round-trip trade across all stocks across the five indices is estimated at HK$50bn (US$6.4bn). There is size to trade in a lot of stocks.</li>
<li>
<a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi (1810 HK)</a> is the biggest buy due to HSIII Index inclusion and capping, while <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd-d7b798e2-202d-4e01-9a1e-799e2ae8f0c7" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba (9988 HK)</a> is the biggest capping sell.</li>
</ul>


The December rebalance of the Hang Seng family of indices will use today's closing prices to cap the index constituent weights.
The net round-trip trade across all stocks across the five indices is estimated at HK$50bn (US$6.4bn). There is size to trade in a lot of stocks.

Xiaomi (1810 HK) is the biggest buy due to HSIII Index inclusion and capping, while Alibaba (9988 HK) is the biggest capping sell.


HSI, HSCEI, HSTECH, HSIII, HSBIO Index Rebalance: US$6.4bn of Flows Post Capping (Dec 2025)

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Thematic (Sector/Industry)

<ul>
<li>The global robotics industry is experiencing rapid growth as the combination of AI and manufacturing efficiency feed demand for robotic products. As a global robotics leader China's companies are benefiting.</li>
<li>Global robotics industry is projected to double over the next few years to over $150 billion by 2030.  China is the world's largest market for industrial robots.</li>
<li>China's leading robotics companies serve industrial industries like auto, equipment, and electronics, as well as service industries like healthcare, biotech, logistics, and hospitality.</li>
</ul>


The global robotics industry is experiencing rapid growth as the combination of AI and manufacturing efficiency feed demand for robotic products. As a global robotics leader China's companies are benefiting.
Global robotics industry is projected to double over the next few years to over $150 billion by 2030.  China is the world's largest market for industrial robots.
China's leading robotics companies serve industrial industries like auto, equipment, and electronics, as well as service industries like healthcare, biotech, logistics, and hospitality.


China Robotics: EVOLUTION OF THE HUMANOID RACE

United States

Hesai Group provides three-dimensional light detection and ranging (LiDAR) solutions. The Company develops LiDAR products which enable a broad spectrum of applications across passenger and commercial vehicles with advanced driver assistance systems, as well as autonomous vehicle fleets providing passenger and freight mobility services. Hesai Group serves customers worldwide.

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Hesai Group (2525 HK)

[Hesai Group (HSAI US, BUY, TP US$35) Review]: Rapid Cost Down Continued Driving Penetration

HESAI (HSAI) reports strong Q2 results with significant growth in LiDAR shipments and gross margin improvement, prompting a reiteration of TOP BUY...

Blue Lotus Research Institute

Hesai Group: Time To Cover Shorts As The Stock Found A Bottom and Delisting Risk Is Real

Hesai Group priced its IPO at $19/ADS in February 2023 and shares have materially underperformed Nasdaq and S&P 500, with shares down ~77% vs. IPO...

Andrei Zakharov

Hesai Group: Growth Acceleration Has Already Priced In While Upside May Be Limited

Hesai Group stock is a one of the most speculative stocks in the LiDAR industry, in my view. I believe investors should take profits on Hesai Group...

Andrei Zakharov

HSI, HSCEI, HSTECH, HSIII, HSBIO Index Rebalance: US$6.4bn of Flows Post Capping (Dec 2025)

The Dec rebalance of the HSI, HSCEI, HSTECH, HSIII, HSHKBIO indices will use today's closing prices for capping. The round-trip trade across the...

Brian Freitas

China Robotics: EVOLUTION OF THE HUMANOID RACE

Global robotics is experiencing rapid growth as the combination of AI & manufacturing efficiency grow robotic product demand. Rapid industry growth...

David Mudd

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

[Hesai Group (HSAI US, BUY, TP US$35) Review]: Rapid Cost Down Continued Driving Penetration

​HESAI (HSAI) reports strong Q2 results with significant growth in LiDAR shipments and gross margin improvement, prompting a reiteration of TOP BUY...

Blue Lotus Research Institute

Hesai Group: Time To Cover Shorts As The Stock Found A Bottom and Delisting Risk Is Real

Hesai Group priced its IPO at $19/ADS in February 2023 and shares have materially underperformed Nasdaq and S&P 500, with shares down ~77% vs. IPO...

Andrei Zakharov

Hesai Group: Growth Acceleration Has Already Priced In While Upside May Be Limited

Hesai Group stock is a one of the most speculative stocks in the LiDAR industry, in my view. I believe investors should take profits on Hesai Group...

Andrei Zakharov

HSI, HSCEI, HSTECH, HSIII, HSBIO Index Rebalance: US$6.4bn of Flows Post Capping (Dec 2025)

The Dec rebalance of the HSI, HSCEI, HSTECH, HSIII, HSHKBIO indices will use today's closing prices for capping. The round-trip trade across the...

Brian Freitas

China Robotics: EVOLUTION OF THE HUMANOID RACE

Global robotics is experiencing rapid growth as the combination of AI & manufacturing efficiency grow robotic product demand. Rapid industry growth...

David Mudd

HESAI (HSAI) reports strong Q2 results with significant growth in LiDAR shipments and gross margin improvement, prompting a reiteration of TOP BUY...