Citibank: First Suteng Juchuang (02498) “Buy” rating target price HK$23.3

The Zhitong Finance App learned that Citi released a research report saying that it covered Sagiteng Juchuang (02498) for the first time and gave it a “buy” rating, with a target price of HK$23.3. The bank pointed out that Suteng Juchuang is the second-largest automotive optical radar manufacturer in China, and has formed a dual oligopoly market pattern with Hesai-W (02525) without counting Huawei.

The bank expects China's automotive optical radar market to grow 11 times, with shipments increasing from 1.6 million units in 2024 to 19.2 million units in 2030. The optical radar penetration rate will also rise from 35% in 2026 to 59% in 2030. The total share of Hesai and Suteng Juchuang in the Chinese market is expected to rise from 63% in 2026 to 79% in 2030.

The bank believes that Suteng Juchuang is at the center of the industry's inflection point, and the market has yet to fully reflect the demand for multi-sensor backup from L3 and L4 Robotaxi, which will further consolidate the dual-oligopoly market pattern, narrow the profit margin and cash flow gap with Hesai, and that the company can rely on its own funds to cover cash consumption and avoid refinancing that dilutes shareholders' rights.

Citi anticipates that the company's profit per share compound annual growth rate from 2027-2029 will reach 108%. The current target price is 0.6 times the predicted price-earnings growth rate in 2027, a 40% discount compared to Hesai, but as profit margins and market share improve, the valuation discount will narrow.