Reevaluation of the application value of AI + holding 15 billion new life cycle orders, PATEO (02889) has a target price of HK$200 given by CICC International.

Recently, CMB International released a research report, covering PATEO (02889) for the first time, and gave it a "Buy" rating with a target price of 200 Hong Kong dollars. The report believes that as a leading intelligent cockpit domain controller supplier in China, the company is actively exploring the commercialization path of car AI-related businesses based on its software capabilities, data accumulation, and close cooperation with ICT giants. In terms of exploring and implementing automotive AI technology, the company has formed an industry-leading advantage, but the value of this business segment may currently be undervalued by the market. CMB International believes that the demand for AI Agents to enhance the in-car experience using technologies such as large language models is imminent. According to data compiled by CMB International, most new flagship models have planned to equip cockpit domain controllers with high computing power chips, which means that AI Agents are expected to become widely popular from 2027 onwards. CMB International specifically points out that PATEO, in the commercialization path of car AI applications, is transitioning from relatively small-scale exploratory businesses in the past to a systematic and scalable growth stage, with related revenues expected to achieve multiple or even tenfold increases. At the same time, the company's strategic cooperation with Ping An Property & Casualty Insurance has entered the revenue contribution stage. Based on driving behavior data optimization for insurance pricing and services, both parties are jointly creating a new business model of "AI + car networking + insurance". Additionally, the "Qinggan" large model jointly developed by PATEO and SenseTime Technology is providing customized customer services to Ping An. The report believes that as AI models mature, unique data resources will become key to monetization, and PATEO's positioning and data accumulation in the industry chain will open up new commercial spaces beyond the automotive sector. In terms of its core intelligent cockpit business, CMB International points out that PATEO, with its "software + hardware + cloud" full-stack technical capabilities, has established deep strategic partnerships with Qualcomm and Huawei, occupying a leading position in the high-end intelligent cockpit market. According to the report by CMB International, it is expected that PATEO has secured nearly 15 billion yuan in new lifecycle orders since the fourth quarter of 2025, with customers including a Korean vehicle manufacturer, Porsche, and a leading Chinese new energy vehicle manufacturer. Based on the company's recent business progress announcements, with the company's leading layout on high computing platforms such as Qualcomm 8295, 8397, and the Kirin 9610A + HarmonyOS solution, it has continually secured international customers such as Porsche and a Korean vehicle manufacturer, accumulating 10 billion yuan worth of high-end intelligent projects at home and abroad. With the mass shipment of Huawei's HarmonyOS Intellink ecological vehicle models in 2026-2027, it is expected that the market share will significantly increase by 2030, and the company, leveraging its "dual-core layout", can not only quickly seize the high-end market but also lock in orders for high-end vehicle models in the coming years, maintaining both business resilience and technological advantages. The report predicts that as sales of high-end cockpit domain controllers rapidly increase, the company's product structure will continue to optimize, with the overall gross profit margin expected to increase from 11.8% in 2024 to 15.8% in 2027. Based on the favorable outlook for AI application business and the core intelligent cockpit business, CMB International gives PATEO a target price of 200 Hong Kong dollars, calculated based on the current total share capital of 150 million shares, with a target market value of approximately 30 billion Hong Kong dollars. The report believes that there is about 100% upside potential in the current stock price.