(Yicai) Oct. 24 -- Horizon Robotics, a Chinese developer of self-driving technology, ended 2.8 percent higher on its first day of trading in Hong Kong.

Horizon Robotics [HKG: 9660] closed at HKD4.01 (53 US cents) a share, giving it a market capitalization of HKD53.4 billion (USD6.87 billion), after the stock soared by as much as 38 percent earlier today.

The Beijing-based firm sold 1.36 billion shares at HKD3.99 apiece, raising HKD5.4 billion (USD695 million) and making it Hong Kong’s biggest initial public offering so far this year. Goldman Sachs, Morgan Stanley, and China Securities International were the joint sponsors.

Cornerstone investors Alibaba unit Alisoft China Holding, Baidu's Hong Kong arm, a company under Merit France, and an investment fund backed by the Ningbo government, subscribed for a total of USD219.8 million of shares.

Horizon Robotics was founded in 2015 by artificial intelligence scientist Kau Yu, who previously worked at the autonomous driving business of Chinese tech giant Baidu.

Since its establishment, Horizon Robotics has completed 11 financing rounds, raising a total of over USD8.7 billion from pre-IPO investors such as Chinese carmakers SAIC Motor and BYD, private equity giant Hillhouse Investment, and venture capital firm Sequoia Capital.

Horizon Robotics was China's fourth-largest provider of advanced driver assistance systems and autonomous driving solutions by installed capacity last year and in the first half of this year, according to China Insights Consultancy. Both revenue and gross profit margin have increased in recent years, but the firm's net losses have widened on high research and development costs.

Revenues were CNY910 million (USD127.8 million) in 2022 and CN1.5 billion (USD210.6 million) last year. In the six months ended June 30, income was CNY935 million, up 152 percent on a year ago. GPM was 69 percent, 71 percent, and 79 percent, respectively, in the three periods.

However, the company's net losses have been shrinking, coming in at CNY8.7 billion in 2022, CNY6.7 billion last year, and CNY5.1 billion in the first half of 2024. R&D spending accounted for 208 percent, 153 percent, and 152 percent of revenues over the three periods.

“It's difficult for these types of autonomous driving companies to be profitable," an executive from an automaker that worked with Horizon Robotics told Yicai.

Horizon Robotics experienced some setbacks in recent years. For example, its chip Journey 5 has not been fully deployed yet. While its chips have been installed in 290 car models, they are mostly Journey 2 and Journey 3, two generations behind the latest product.

"We tested the Journey 5 when checking for chips for our cars, but we found out that the product is not as advanced as we thought," a spokesperson from a self-driving tech company told Yicai.

Another issue for Horizon Robotics is the fact that it relies on its five key customers, which accounted for nearly 80 percent of the firm's revenue in the first half of the year. One of them is Cariad, the auto software unit of Germany’s Volkswagen Group.

Editor: Futura Costaglione