PRC Government Increases Hikvision Ownership

By: Charles Rollet, Published on Nov 12, 2018

The PRC government - Hikvision's controlling shareholder - is increasing its ownership of the video surveillance giant amid sharp stock price declines, the US considering sanctions, and Hikvision's president saying they are focusing on survival.

IPVM Image

In this note, we examine this move and how sustainable such a strategy is given unprecedented scrutiny over PRc government influence in video surveillance.

Context: Hikvision Stock Price Crash

Hikvision’s stock price has fallen from an all-time high of 44 yuan in March to 26.35 yuan, a decrease of 40%:

IPVM Image

This was not only because of Hikvision-specific factors like decelerating sales growth, the NDAA ban, and possible sanctions, but also broader trends like tariffs caused by the US-China trade war.

Worried PRC investors asked Hikvision [link no longer available] whether any “measures to maintain the stability of the stock price” were coming.

[Update: Monday, Nov 12th, PRC stocks increased as the PRC government says it will make it easier for PRC companies to buy back their own stocks. Hikvision went from 26.35 to 27.78 on that news.]

China Government Steps In

Get Notified of Video Surveillance Breaking News
Get Notified of Video Surveillance Breaking News

On October 24, Hikvision announced [link no longer available] an "increase in our controlling shareholder's stake in the company" after an entity called CETCIH bought about $4m worth of shares and pledged to buy $21m to $42m worth of stock over the next six months.

CETCIH (CETC Investment Holdings) is the finance/venture capital arm of the CETC, Hikvision's controlling shareholder and a fully PRC government-owned military and defense conglomerate. The CETC, who created and controls Hikvision, owns over 40% of Hikvision. (Hikvision PRC Government Owner CETHIK Exposed.)

CETCIH exists mainly to "strengthen market value" of the CETC's businesses by "making full use of the internal resources of the group company," according to its own website, [link no longer available]which also has a specific section devoted to [Communist] "Party building" activities [link no longer available].

Help From The Family

JRJ, a top PRC financial media outlet, reported that this was a way for Hikvision’s “family” – i.e. the state-owned CETC – to “maintain” its flagging share price.

This share purchase does not change Hikvision's controlling shareholder but sends a signal to investors that the PRC government is standing behind Hikvision during this downturn.

While Hikvision has denied the CETC's influence on its operations, as the DC-based think tank Asia Society recently wrote in a report on PRC state-owned enterprises, “investors know that the ultimate locus of decision-making is at the group company level, not the listed company level”. In Hikvision's case, the "group company" level would be the CETC, while the "listed company" is Hikvision.

"Absolutely Not Sustainable" In the Long Term

Christopher Balding, a professor at Fulbright University in Vietnam and China economy expert, said via email that such purchases were "relatively standard operating procedure" during "stressful periods in the market."

However, Balding said that while such measures may work "as a way to prop up the stock", in the long run "it is absolutely not sustainable" due to already high levels of PRC government spending on the economy.

Past Government Help

The PRC government's move to directly support Hikvision's stock is only the latest way that the company has benefited from the PRC government, something Hikvision's overseas leadership has denied but has been admitted to elsewhere. In a 2016 bond prospectus, Hikvision listed "strong support from PRC government and our state-owned parent" as a "competitive strength." The firm also touted "substantial fiscal subsidies" and free land from the government. (Hikvision: PRC Government "Exert Significant Influence Over Our Business").

Benefits

The benefits of the PRC government’s support to Hikvision are obvious. It shows that the PRC government stands by Hikvision when turmoil hits the markets. It also gives Hikvision a strong advantage domestically, given that its closest rival Dahua is a private company.

Dahua has not received the level of direct government support – like outright share buying from a state-owned parent company – as Hikvision. That’s partly why Dahua’s stock price has crashed even harder this year than Hikvision’s, falling by almost 60% from a high of 30 yuan ($4.33) to around 13 yuan ($1.88).

(Dahua's overall market cap is about $5.3 billion to Hikvision's $36 billion.)

IPVM Image

Risks

However, continued and increasing PRC government ownership has risks. Global scrutiny of Hikvision over possible espionage and human rights is increasing, particularly due to its PRC state backing.

Global media and governments have focused on Hikvision's government ownership as a potential national security issue. This contributed to the US government banning federal purchases of Hikvision equipment and the Australian military's promise to remove all Hikvision cameras on its bases.

Meanwhile, Dahua has no qualms about promoting the fact that it is not China government-owned, in an attempt to shake off concerns over its products. (Dahua Ban Response: NOT China Government Owned).

Conclusion

It remains to be seen if the PRC government's strategy will pay off for Hikvision. On the one hand, having a powerful, authoritarian government on your side can help during difficult times. On the other, increased PRC government ownership will heighten concerns over government influence at a time of unprecedented scrutiny.

1 report cite this report:

The 2019 Video Surveillance Industry Guide on Dec 10, 2018
The 300 page, 2019 Video Surveillance Industry Guide, covers the key events...
Comments (13) : Members only. Login. or Join.

Related Reports

Uniview H1 2020 Financials Examined on Sep 08, 2020
While Dahua and Hikvision, helped by fever camera sales, are recovering from...
Hikvision Global News Reports Directory on Aug 13, 2020
Hikvision has received the most global news reporting of any video...
The Booming Multi-Billion Coronavirus Fever Camera Market on Apr 21, 2020
The market for elevated body temperature detection cameras, aka 'coronavirus...
US Passes Uyghur Human Rights Law Condemning Mass Surveillance on Jun 18, 2020
The US government has passed the Uyghur Human Rights Policy Act of 2020,...
Dahua Profits Surge Due To Fever Camera Sales on Aug 25, 2020
While Dahua's overall revenue is down, driven by challenges within China, the...
NetPosa's Terrible Situation Worsens on May 19, 2020
NetPosa is fighting for its existence as the situation worsens for what was...
Hikvision Fever Screening Thermal Solutions Examined on Apr 13, 2020
Hikvision is marketing "safer, faster, smarter" with their Fever Screening...
Netposa Stock Surges 46% After US Human Rights Abuse Sanctions on May 27, 2020
Last Friday, the US government announced it would sanction PRC video...
Temperature Screening Is Ineffective, Says US, UK, Canada, Israel, And Ireland Health Leaders on Aug 25, 2020
Health leaders around the world are increasingly speaking out about the...
Hikvision Returns To Growth Driven By Overseas Fever Cameras on Jul 29, 2020
While Hikvision's revenue fell in Q1 2020, it rebounded in Q2 attributed to...
Faked Coronavirus Fever Detection, Athena Used Hikvision; Responds - Selling NDAA Compliant Cameras, Pledging 50% Of Profits to Victims on Mar 24, 2020
US company, Athena Security, faked its coronavirus fever detection marketing,...
Infinova, March Networks and Swann H1 2020 Financials Examined on Sep 02, 2020
While Dahua and Hikvision, helped by fever camera sales, are recovering from...
Huawei HiSilicon Shortage Impacts Surveillance Manufacturers on Aug 14, 2020
Huawei acknowledged problems and challenges for its HiSilicon chip business,...
Hikvision Global Revenue Falls, Hit By Coronavirus on Apr 27, 2020
Hikvision's global revenue fell in the first quarter of 2020 due to the...
Sunell Panda Cam Body Temperature Measurement Camera Tested on May 14, 2020
Sunell is far less well known than its gargantuan domestic competitors Dahua...

Recent Reports

Virtual ISC West and GSX+ Exhibiting Contrasted on Sep 17, 2020
Both ISC West and ASIS GSX are going virtual this year, just weeks apart, but...
X.Labs Sues FLIR on Sep 16, 2020
X.Labs, the maker of Feevr, has sued FLIR, the publicly traded thermal...
Video Surveillance 101 September Course - Last Chance on Sep 16, 2020
Today is the last chance to sign up for the Fall Video Surveillance 101...
No Blackbody Mistake, Half Million Dollar, Hikvision Fever Camera System in Georgia on Sep 16, 2020
A Georgia school district touted buying Hikvision fever screening "about...
Costar Technologies / Arecont H1 2020 Financials Examined on Sep 16, 2020
Costar's financial results have been hit by the coronavirus with the company...
Startup Cawamo Presents Live Alerts With Edge AI and Cloud VMS on Sep 15, 2020
Cawamo, an Israeli edge-to-cloud analytics and VMS startup, presented its...
Favorite Access Control Credentials 2020 on Sep 15, 2020
Credential choice is more debated than ever, with hacking risk for 125kHz and...
Dangerous Hikvision Fever Screening Marketing In Africa on Sep 15, 2020
A multi-national African Hikvision distributor is marketing dangerously...
New Products Show Fall 2020 Announced - Register Now on Sep 14, 2020
IPVM's sixth online show will feature New Products from over 25...
Hanwha 8K / 33MP Camera Tested on Sep 14, 2020
Hanwha Techwin has released an 8K / 33MP resolution camera, the TNB-9000 with...
Gait Recognition Examined on Sep 14, 2020
Facial recognition faces increasing ethical and political criticisms while...
Comparing 2020 Reality To 2010 Expectations on Sep 11, 2020
What can we learn from where the industry was in 2010 and what was believed...
China Dali Fever Cameras and Booming Sales Examined on Sep 11, 2020
Zhejiang Dali, one of China's original thermal technology developers, has...
Risks Of Managing End User Passwords (Statistics) 2020 on Sep 11, 2020
Alarmingly, most integrators used spreadsheets to manage passwords, IPVM...
Dedicated Vs Converged IP Video Networks Statistics 2020 on Sep 10, 2020
Running one's video system on a converged network with other devices can save...