Morgan Stanley upgrades an under-the-radar China robotics play, sees big upside
Investors seeking to ride the robotics wave should consider buying Hesai Group, according to Morgan Stanley. The bank upgraded the U.S.-listed shares of the Chinese tech company to an overweight rating from equal weight. Hesai supplies LiDAR products such as sensors, which are then used in the robotics industry. Shares of Hesai have surged 54% this year. Analyst Tim Hsiao’s new price target of $26 per share, up from $23, implies a further upside ahead of 22%. HSAI YTD mountain HSAI YTD chart “We raise our 2026-27 volume forecasts as Hesai continues to gain share amid growing LiDAR adoption in China,” Hsiao wrote. “More overseas projects could enhance ASP/margin, while project wins from robo-players could also fuel a second revenue growth driver and lead to potential re-rating.” In the Sunday note, Hsiao specified that one reason he was raising his volume forecasts was due to continuous domestic volume share gain. Hesai’s volume share continued to rise among suppliers, reaching 37% in May 2025 versus 22% in May 2024. “Despite intensifying competition among Chinese EV players amid a challenging macro environment, LiDAR adoption continues to grow at an unprecedented rate, as more than 1 in 5 NEVs sold in China in May were equipped with LiDAR,” Hsiao added. “With near-term headwinds — Li Auto’s 2Q volume guidance cut, BYD’s sluggish God’s Eye model sales — largely reflected in Hesai’s share price, we see further volume upside from Xiaomi, Leap Motor, as well as wallet share gain in BYD.” The analyst also expects LiDAR adoption to rise as the adoption of L2+ smart driving rises overseas, with Hsiao predicting penetration to reach 15% to 20% in ex-China regions by 2030. Like the existing China market, Hsiao expects that by 2030, it could become a standard safety specification in any vehicles priced above $30,000. Another catalyst also comes in the form of a growing robotics business, he wrote. Potential products that could fit in this category include lawnmowers and humanoids. “We expect robotaxis and smart home robotic appliances to serve as Hesai’s second revenue growth driver from 2026 onwards,” he added. “In fact, we expect much higher ASP/margin profile from robotaxi players (given more LiDAR units per car), and a TAM of US$5bn for the humanoid/smart home robotics market.”
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