> **来源：[研报客](https://pc.yanbaoke.cn)** # PATEO CONNECT (2889 HK) Summary ## Core Content PATEO CONNECT (2889 HK) is a leading provider of smart cockpit and vehicle connectivity solutions in China's automotive intelligence industry. It is ranked as the third-largest smart cockpit domain controller supplier in 2024 with a shipment volume of 0.9 million units and a market share of 7.3%. The company has established deep partnerships with major ICT players such as Qualcomm and Huawei, positioning itself as a market leader in Snapdragon- and Kirin-based smart cockpit solutions. It is also expanding into AI-related vehicle applications, which could offer additional growth opportunities. ## Main Points - **Market Position**: - Ranked 3rd in China's smart cockpit domain controller shipment volume in 2024. - Market leader in Snapdragon- and Kirin-based smart cockpit solutions. - Top 5 providers in the smart cockpit domain controller market accounted for 53.3% of shipment volume. - **Strategic Partnerships**: - Deep cooperation with Qualcomm and Huawei, which are key players in the smart cockpit chip market. - Collaborated with Ping An Property & Casualty Insurance to develop AI-powered insurance services. - Secured design wins with a South Korean automaker and is expected to gain more revenue from new clients such as Porsche and leading Chinese NEV makers. - **Product Mix and Revenue Growth**: - Pateo offers domain controllers with high-end, mid-end, and low-end SoC configurations to cater to different vehicle segments. - Revenue is projected to grow at a CAGR of 49% from FY24 to FY27E, reaching RMB8.5bn in FY27E. - Revenue growth is expected to be driven by high-end domain controller sales and rising ASPs. - **Profitability and Margin Improvements**: - Adjusted net profit is projected to reach RMB262mn in FY27E. - Gross margin is expected to widen due to improved product mix, economies of scale, and AI applications. - The company is projected to break even in FY26E and achieve positive adjusted operating profit. - **Valuation and Investment Rating**: - Initiated with a BUY rating and a target price of HK$200. - The valuation is based on a SOTP model with 2x FY27E P/S for smart cockpit business and 10x FY27E P/S for AI application business. ## Key Financial Projections | Metric | FY23A | FY24A | FY25E | FY26E | FY27E | |--------|------|------|------|------|------| | Revenue (RMB mn) | 1,496 | 2,557 | 3,543 | 5,827 | 8,487 | | YoY Growth (%) | 22.8 | 70.9 | 38.5 | 64.5 | 45.6 | | Gross Margin (%) | 15.4 | 11.8 | 12.9 | 14.8 | 15.8 | | Net Profit (RMB mn) | (283.9) | (541.2) | (1,173.5) | (439.2) | 62.1 | | Adjusted Net Profit (RMB mn) | (218.5) | (352.8) | (250.1) | (39.2) | 262.1 | | P/S (x) | 8.8 | 5.2 | 3.7 | 2.3 | 1.6 | ## Key Risks - Reliance on a few major clients (top five customers accounted for 84% of revenue in FY24). - Competition in the smart cockpit market, especially from standalone software or hardware suppliers. - Market volatility and uncertainty in AI application monetization. - Potential challenges in scaling production and maintaining margins as the market grows. ## Shareholding Structure - **Mr. Ying Zhenkai**: Holds 31.8% of voting rights through a 21.5% equity stake and a 10.2% stake via the employee incentive platform. - **Local Government Funds**: Hold 18.4% equity stake collectively, including from Zhejiang, Shanghai, Jiangsu, and Sichuan provinces. - **Other Major Holders**: Include Xiaomi (Tianjin Jinmi), Ping An Capital, Shanmei Fund, and Dongfeng Group, each holding 2-5% equity. ## Production Capacity and Expansion - **Xiamen Production Center**: Production capacity tripled to over 1.4mn units in 2024. - **Liuzhou Production Center**: Started production in early 2025 with 150,000 units capacity annually. - **Rui'an Production Center**: Expected to start production in 2026 with 0.4mn units capacity annually. - The production capacity is projected to cover sales volume growth up to 2027. ## Employee Structure - Total employees as of 31 May 2025: 2,106 (2,098 full-time and 8 part-time). - R&D employees account for 33.7% of the workforce. - The company has six R&D centers in Nanjing, Dalian, Shenyang, Shenzhen, Wuhan, and Changchun. ## AI Business Potential - Pateo's AI application revenue is projected to reach RMB0.7bn in FY26E and RMB1.2bn in FY27E. - The AI business includes AI box and data-driven insurance services. - The company's close partnership with Huawei positions it as a proxy for the Huawei concept, potentially unlocking new business opportunities. ## Investment Thesis - Pateo is well-positioned to outperform industry growth due to strong software capabilities, overseas expansion, and improving product mix. - The company is expected to secure significant new orders, leading to higher revenue and margin lift. - AI business could be undervalued and provide positive surprises. - Pateo's integrated hardware-software solutions may lead to better performance and faster growth compared to competitors. ## Conclusion Pateo is a key player in the smart cockpit market, with strong partnerships and a growing AI business. Its integrated approach, strategic expansion, and projected revenue growth make it an attractive investment opportunity, supported by a BUY rating and a target price of HK$200.