GTHT recently issued a research report initiating coverage on PATEO (02889) with a "Buy" rating and a target price of HK$280.20. The report highlights that amid accelerating automotive intelligence, smart cockpits—as a core interactive interface—continue to expand. PATEO has established a clear growth trajectory through its technological capabilities, customer base, product upgrades, and international collaborations. With expanding revenue scale, recovering gross margins, and improved operational efficiency, the company is expected to reach a substantial profitability inflection point, achieving its first annual profit in 2026.
Data shows that as of August 2025, the penetration rate of smart cockpit domain controllers in China reached 41.1%, up 12% year-on-year, indicating a critical transition phase from optional to standard configurations. Benefiting from this trend, PATEO secured a 10.87% market share, becoming the second-largest supplier of pre-installed cockpit domain controllers for new energy passenger vehicles in China from January to September 2025. Its clients include leading NEV brands such as Huawei, Li Auto, XPeng, Avatr, Voyah, and Seres. Notably, in 2024, Huawei and Li Auto accounted for approximately 50% of PATEO’s total revenue.
As demand for higher-performance cockpit experiences grows, PATEO’s average product prices have risen steadily. The average selling price of domain controllers increased from RMB 990 in 2023 to RMB 2,141 in 2024 and further to RMB 2,257 in the first five months of 2025. The report suggests that structural price increases will likely persist over the next two years, serving as a key driver for profitability improvement.
On the international front, PATEO entered a strategic partnership with Porsche in September 2025 to co-develop next-generation infotainment systems for the Chinese market, slated for deployment across multiple Porsche models from 2026 onward. This marks PATEO’s first large-scale entry into the global luxury automotive supply chain. The company has also secured partnerships with Hyundai and Kia while supporting Chinese brands like Seres in overseas expansion, forming a dual-track growth model of "serving global automakers + facilitating Chinese OEMs’ globalization." GTHT views this strategy as one of PATEO’s most significant incremental revenue sources over the next three years.
In AI technology, PATEO partnered with SenseTime in October 2025 to advance innovations in AI-powered cockpits, large models, and robotics. Additionally, the company brought on Horizon Robotics as a strategic investor during its IPO, with both parties jointly developing integrated cockpit and autonomous driving solutions to evolve smart cockpits toward AI-driven systems, potentially unlocking a second growth curve.
Financially, PATEO’s gross margins fluctuated between 2022 and 2024 (14.1%, 15.4%, and 11.8%) due to chip costs and R&D expenses. However, GTHT forecasts a gradual recovery from 12.9% in 2025 to 13.5% in 2026 and 13.8% in 2027, supported by business scale expansion. R&D expenses have been optimized, dropping from RMB 277 million in 2022 to RMB 207 million in 2024, with projected annual spending of RMB 190–240 million over the next three years to balance investment and efficiency.
Revenue-wise, GTHT expects PATEO to maintain rapid growth, with a 40.5% CAGR from 2024 to 2027, primarily driven by smart cockpit solutions. As scale expands, expense ratios decline, and overseas contributions rise, the profitability inflection point becomes clearer. The report predicts PATEO will turn profitable in 2026 with net income of ~RMB 45 million, rising to RMB 175 million in 2027—a pivotal period for market repricing.
Valuation-wise, GTHT assigns PATEO a 7.0x 2026E P/E multiple, reflecting a premium over peers and justifying the HK$280.20 target price, based on its customer portfolio, technological edge, and global collaborations. With industry consolidation accelerating and high-end partnerships like Porsche materializing, PATEO’s growth prospects continue to strengthen.