Hesai's Plunge: What Went Wrong?

$Hesai(HSAI.US) released its third-quarter report after the Hong Kong stock market closed and before the U.S. stock market opened on November 11, 2025. Despite the report being quite impressive and exceeding expectations in all aspects, the stock prices in both the U.S. and Hong Kong markets fell by nearly 10 points, contrary to the positive financial results. Dolphin Research attempts to dissect the reasons for this significant drop:

① The third-quarter report itself and the guidance for the fourth quarter of 2025 are both very positive and exceed expectations. The third-quarter performance speaks for itself, as detailed in "Hesai: Tesla 'Disdain'? Still Growing Wildly". As for the fourth-quarter guidance, whether it's the lidar shipment guidance of 600,000 units (significantly beating the market expectation of 500,000 units), revenue guidance of 1-1.2 billion yuan (in line with the market expectation of 1.15 billion yuan), or net profit guidance of 70-170 million yuan, all exceed market expectations.

Therefore, the issue does not lie in the third-quarter performance itself or the fourth-quarter guidance. Dolphin Research believes the problem may stem from the shipment guidance for 2026:

Hesai's shipment guidance for 2026 is 2-3 million units, with the gross margin guidance remaining the same as 2025 (estimated at 41.4% for the full year of 2025). The average selling price (ASP) of lidar will continue to decline (mainly due to an increase in shipments of lower-priced passenger car lidar and downstream customers' annual price reduction demands).

At first glance, this guidance seems fine. Hesai's lidar continues to follow the logic of price reduction driven by technological advancements, thereby increasing penetration and accelerating scenario expansion. While the price continues to decline, the stable gross margin guidance confirms Hesai's strong technological cost reduction efforts and scale effect advantages.

However, regarding shipment guidance, the market's expectation for Hesai's 2026 shipments is around 2.5 million units. Hesai's shipment guidance is very broad (2-3 million units), and from the perspective of the lidar industry, next year's increase in penetration and shipment volume mainly comes from several aspects:

① Robots: Accelerated expansion of scenario applications: In addition to serving as the "eyes of intelligent driving," lidar may also serve as the "eyes of robots," but this is still a relatively long-term option value, contributing little to 2026.

Hesai has also guided this year's robot radar shipments at 200,000 units (including shipments for sweeping robots and Robotaxi scenarios), and next year is expected to double, implying an increase of about 200,000 units in robot lidar, which is not the main contribution. Therefore, the key still lies in the incremental contribution of ADAS lidar.

② In ADAS lidar, Hesai will mainly benefit from two trends:

1) The regulations for L3 are accelerating, and it has become a trend for L3 and above models to be equipped with multiple lidars (L3 with 3-6 units, L4 with 8 units). However, the progress of L3 is clearly not that fast. Hesai has also guided that the main lidar ETX+ multiple blind spot radar FTX solution (multi-lidar solution) will be mass-produced by the end of 2026 or early 2027, so it still cannot contribute to the main increment of lidar shipments in 2026.

2) The "intelligent driving equality" trend of L2+ customers continues to sink: In 2025, several major car companies with price ranges between 100,000-200,000 yuan, such as BYD, Geely, and Great Wall, launched intelligent driving models, but the city NOA version is still limited to models above 170,000 or even 200,000 yuan, and has not truly been extended to the price range of 100,000-200,000 yuan, which accounts for the highest sales proportion.

In 2026, the market is most looking forward to seeing these "giant" car companies extend their city NOA (such as BYD's "Eye of the Gods" A/B) to the 100,000-200,000 yuan price range. Due to the higher technical difficulty of city NOA, lidar has become a necessity, capable of serving as both a "safety airbag" and "technical redundancy," and is also the main source of contribution to the increase in lidar penetration and increment in 2026.

Therefore, when the scenario expansion logic and L3 advancement are not that fast, L2+ major car company customers become the main source of contribution to the 2026 lidar shipment volume, whoever can secure orders from these major customers can directly become the certainty increment in the 2026 performance.

Regarding this key contradiction, the market is actually very concerned about whether BYD's major customer orders will be snatched by SUTENG? However, this time, Hesai only disclosed confirmed orders from Li Auto and Xiaomi, but for the orders from BYD, which the market is most concerned about and can contribute the main increment in 2026 (currently, BYD's "Eye of the Gods" A/B uses a mix of SUTENG and Hesai lidars, 50:50), and Geely (currently, mid-to-low-end models mainly use SUTENG), Hesai only mentioned that cooperation with BYD is still ongoing, and more details will be announced when BYD officially announces new models and intelligent driving solutions.

And the very broad shipment guidance for 2026 (2-3 million units), with a difference of 1 million units between the bottom and top end, may also indicate that orders from major customers like BYD are still under negotiation and have not been secured.

If calculated according to the bottom line of the 2026 shipment guidance of 2 million units, the shipment volume in 2026 would only increase by 25% year-on-year (218% yoy in 2025), and passenger car lidar would only increase by 17% year-on-year (200% yoy in 2025), with a significant slowdown in shipment volume, also implying that there is basically no increment brought by these existing L2+ major customers.

Therefore, Dolphin Research estimates that the market will start to worry about the uncertainty of orders from major customer BYD, especially the competition from SUTENG. In the second quarter SUTENG earnings call, it was mentioned that 32 BYD models will be designated for SUTENG's newly released product EMX (Hesai has refuted that BYD has not yet confirmed), and SUTENG has given an optimistic guidance of 1-2 million units for EMX shipments in 2026.

Therefore, the significant drop after this performance may be due to short-term PE funds choosing to temporarily avoid the situation, given the current high valuation (if calculated based on the midpoint of the shipment guidance of 2.5 million units, implying a PE multiple of 35 times for 2026), without seeing Hesai provide confirmed orders from these major customers for 2026, the certainty of the 2026 performance is still not that strong.

And Hesai's current market value of 23.1 billion yuan, from a medium-to-long-term TAM perspective, is only priced for the Chinese ADAS passenger car market, and clearly does not price the relatively high certainty overseas market (overseas lidars are expensive and perform poorly) + the second growth curve of robots.