Hesai , the builder of lidar technology used in self-driving cars, could be in for strong gains after selling off following its U.S. initial public offering, according to Bank of America. The bank initiated coverage of Hesai with a buy rating and a price of $14.80. That implies an upside of more than 45% from Thursday’s close. Hesai’s U.S.-listed shares debuted in February. Since then, the stock has fallen more than 46%. Despite the sell-off, analyst Jessie Lo thinks the company “deserves a valuation premium against peers, given its leading position in market share, shipment, order gain, margin, breakeven timeline, and balance sheet/cash flow management.” HSAI ALL mountain Hesai all-time chart Lo sees strong growth ahead for the company driven by new clients and projects, especially as the company continues to expand outside of China through strategic development programs with North American and European manufacturers. “We expect Hesai to ride on the ADAS [advanced driver assistance systems] industry takeoff and growing LiDAR penetration, and deliver 60% sales CAGR [compound annual growth rate] in 2023-25,” she said. The analyst added that although a change in product mix may send Hesai’s gross profit margin to its lowest level of 30% in 2023, she believes this number is due to pick back up next year. “We expect GPM to recover to 35% in 2025, thanks to 1) Hesai migrating into new production lines with higher automation and efficiency; 2) continuous product upgrades, which simplify and optimize the architecture, supporting cost-down; and 3) economies of scale,” the analyst wrote. — CNBC’s Michael Bloom contributed to this report.
