Citi has released a research report initiating coverage on RoboSense (HKEX: 02498) with a "Buy" rating and a target price of HK$23.30.

The bank notes that RoboSense is China's second-largest automotive optical radar manufacturer.

The bank expects China's automotive optical radar market size to grow 11-fold, with shipments rising from 1.6 million units in 2024 to 19.2 million units in 2030. Optical radar penetration is also expected to climb from 35% in 2026 to 59% in 2030. The combined market share of Hesai and RoboSense in the Chinese market is projected to increase from 63% in 2026 to 79% in 2030.

The bank believes that RoboSense is positioned at the core of an industry inflection point, while the market has not yet fully reflected several factors: the demand for multi-sensor redundancy from L3 and L4 level Robotaxis will further solidify the duopoly market structure; the expansion of the robotics business will narrow its profitability and cash flow gap with Hesai; and the company can rely on its own funds to cover cash burn, avoiding equity-dilutive refinancing.

Citi forecasts that the company's earnings per share compound annual growth rate will reach 108% from 2027 to 2029. The current target price represents 0.6 times the 2027 forecast PEG, a 40% discount to Hesai. However, as profit margins and market share improve, the valuation discount is expected to narrow.