Wang Chuanfu-backed smart driving unicorn gears up for IPO

On the eve of this year's Beijing Auto Show, BYD Chairman Wang Chuanfu made a rare appearance at a supplier's press conference to show his support.

Now, Horizon, the smart driving unicorn backed by Wang Chuanfu, has entered the sprint stage for its IPO.

Recently, Horizon obtained the permit for a listing in Hong Kong - the China Securities Regulatory Commission website released a notice of overseas issuance and listing filing for Horizon Robotics. Following the normal process, Horizon will soon enter the hearing stage and ring the bell at the Hong Kong Stock Exchange.

According to the listing filing notice, Horizon plans to issue no more than 1,153,546,800 common shares and list on the Hong Kong Stock Exchange.

Among the Chinese autonomous driving companies that are planning to go public or have already gone public, Horizon is the highest valued, reflecting market and investor optimism towards it.

The prospectus shows that Horizon has completed 11 rounds of financing, with a total financing amount of $2.36 billion. By the end of the D round financing in 2023, Horizon's post-investment valuation has reached as high as $8.71 billion, approximately RMB 62.8 billion.

Horizon has achieved this valuation due to the favor of venture capital and industrial capital.

In the early stages of investment, funds mainly came from well-known investment institutions such as Sequoia Capital, Hillhouse Capital, Sequoia China, GGV Capital, and Linear Capital.

After gaining some influence, Horizon gained favor from the automotive industry's upstream and downstream industrial capital.

Among them are OEMs that use Horizon chips and smart driving solutions, such as FAW, SAIC, GAC, BYD, Chery, as well as non-OEM companies in the industry chain, such as Intel, SK Hynix, CATL, Luxshare Precision, Starry Sky, and Weir Share.

Thanks to the support of these companies, Horizon, founded 9 years ago, has grown to a valuation of over 60 billion and has successfully entered the top tier of smart driving suppliers.

Among smart driving suppliers, the top four are known in the industry as the "Four Giants of the Earth", with Huawei and DJI backed by strong parent companies, while Horizon and Momenta are both planning for IPOs.

Among the many autonomous driving startups, Horizon is one of the earliest companies. Its founder, Yu Kai, also comes from the autonomous driving industry's "Whampoa Military Academy" - Baidu, where he served as the Vice President of Baidu's Deep Learning Institute. The institute was personally led by Baidu's CEO, Li Yanhong.

In 2015, Yu Kai, who had nearly 20 years of experience in the field of artificial intelligence, decided to start a business and plunged into the field of automotive-grade chips. Two years later, Horizon's first product series, Journey 1, was launched.

However, at that time, the electrification of the automotive industry was just beginning, with a very limited penetration rate of new energy vehicles and even less discussion about chip shipments. Horizon, along with other companies in the smart driving field, was still relying on investor funding to survive.

The turning point came after 2020, when Horizon released its third product, Journey 3, and in 2021 it was installed on Li ONE, the first car from Li Auto. At that time, the world was in the midst of a chip shortage, and chips from Horizon enabled Li ONE to be delivered smoothly Starting from Li Auto, Horizon's Journey series chips are also being deployed in more vehicle models.

Li Xiangfu also revealed that the cooperation between Horizon and BYD began in March 2021. In 2022, Horizon officially announced the collaboration, stating that after the launch of Journey 5 in 2023, it will first be deployed in some models of BYD. Currently, over a million BYD vehicles have adopted Horizon's solutions.

The support from various car manufacturers has directly boosted Horizon's shipment volume. According to the prospectus, by 2023, the total shipment volume of Horizon's Journey series products has reached as high as 5 million units.

By the end of 2023, Horizon's solution partners reached 24 companies, covering 230 models from 31 brands. The top ten car manufacturers in China all have collaborations with Horizon.

Although it started with hardware, the chip shipment volume is also on the rise. However, what truly forms a commercial closed-loop for Horizon is the integration of software and hardware. In the prospectus, Horizon spent a lot of space introducing its capabilities in software-oriented solutions.

Now, Horizon positions itself as a "provider of advanced driver assistance systems (ADAS) and high-level autonomous driving (AD) solutions for passenger vehicles," namely an integrated supplier of autonomous driving software and hardware, and algorithm licensing services.

After the integration of software and hardware, Horizon's revenue has grown rapidly. From 2021 to 2023, Horizon's operating income was 466 million yuan, 905 million yuan, and 1.551 billion yuan respectively, with a compound annual growth rate exceeding 80%.

Especially last year, Horizon's collaboration with Volkswagen added significant value. In November 2023, the joint venture company CoolCore, co-owned by Volkswagen (60%) and Horizon (40%), was officially established.

Although newly established, in just last year, this company brought in 630 million yuan in revenue for Horizon, becoming a key variable for its growth.

Of course, like most companies in the smart driving industry, Horizon is still in a high R&D investment stage and has not yet turned a profit. However, Horizon has shown an excellent gross profit margin.

From 2021 to 2023, Horizon's gross profit margins were 70.9%, 69.3%, and 70.5% respectively. In the industry, this profit margin is second only to NVIDIA.

Horizon's licensing and service business is the source of maintaining a high gross profit margin, allowing customers to pay separately for algorithms.

In 2023, this business accounted for 62% of total revenue, and due to the extremely low software marginal cost, the profit margin of this business in 2023 reached 89%, making it the most profitable business among all its operations.

From this perspective, Horizon entered the market with hardware but is making money through software. The strategy of software and hardware integration continues to bring in more growth for the company.

As of the end of last year, Horizon had 11.36 billion yuan in cash and cash equivalents, which is better than many companies that have recently rushed for IPOs, enabling it to sustain high-intensity R&D efforts However, in an industry that is all about technology and innovation, Horizon Robotics faces significant challenges.

Currently, competitors are going public one after another, and many car manufacturers are emphasizing self-developed software and hardware. Whether Horizon Robotics can continue to deepen its partnerships, secure its position in the low-end and high-end smart driving chip market, or even strive for the top spot, will be crucial in shaping market expectations.

Recently, there have been consecutive listings of smart driving companies, but many have experienced listing price drops, causing concerns in the market: when the tide recedes, how many players will be able to maintain their competitiveness and stand at the forefront?

For Horizon Robotics, going public is just the beginning. It still needs to prove itself in the long battle ahead