Hikvision Strong Domestically, International Business Struggles

By John Honovich, Published on Jul 25, 2018

Hikvision's H1 2018 results are out. Overall revenue growth has sharply dropped, with the company acknowledging their "facing geopolitical headwinds". Hikvision was hurt by Hikvision International (i.e., 'overseas') business but buoyed by the protected domestic market.

In this note, we examine:

  • Steep fall in gross margins
  • Sharp rise in sales expenses
  • Challenges and priorities for Hikvision going forward

Financial ********

********* ************* / ******** business ******** * **** 6 ***** **** ** gross *******: 

**** ** * ***** **** as ***** ****** ********** tend ** **** ****** a *** ******, ** most, *** ****.

*** ******** **** *** Hikvision ** **** ***** domestic ******** (***** ******* competitors *** *********** ******), **** up * ******.

*** *********** ***** *** very ********* ******* **** historically ***** *** ******** business *** **** ****** gross ******* **** ********, e.g.,**** *** ** **** results:

*** ******** ******** ***** much ****** ***** ******* because *** **** ** doing ******** ** *** US *** *** ** is *** ****** *** the ***** ** ******** they **** ***** ** much *****.

Exhange ***** ******* *** ** *** *******

********* ***** "******** **** fluctuation *** ******** ******* structure ******" ** ****** for *** ***** ****** drop. ***** *** ***'* fall ******* *** *** has ****** *** **** recently, ******* *** **** has ********** ** *** same ***** **** *** past * *****, ******** the ****** **** ***** have, ****** *** ***** *****:

Sales ***** ** *************

******* ******** ********* *** more **** ***** *** rate ** ******* ****** in ** ****:

***** ********* **** ******* * single ****** ******* *******, it ** ***** ****** this ** ***** ****** by ************* ***** ** Hikvision *** ************* ******** efforts ** *** ******* of *****.

**** ****, ******* ******* ratio ** ******* ** sharply. *** *******, **** in ****, ********* ***** less **** *% ** revenue ** ******* ********, now ** ** ****, it ** *********** **% of *******.

Coping **** *************

*********'* #* ****** *** was '******' **** *************. To ** *****, ********* does *** **** *** trade ************* ** *** benefited **** ****** ** China *** ***** *** the ** ***** ** the **** **** ****.

Revenue ****** ***** ***************

******* *** ***** ******* in ***** ****** *** ***** expenses ********, ********* ********** steady ******* ****** ** a ********:

****** ** ******** ****** growth ** ******* ** adopting ******** ******** **********.

通过采取有针对性的区域策略努力保持收入的稳健增长

******** ******* ****** *** 26.7% *** ** ****. Hikvision *** *********, *** unsurprisingly, *********** ******* ****** over ******* / ******** losses. ******* ****, ******** Hikvision ******* *** ***** higher **** ********, ******* and ********** *** *** domestic ********, ***** *** already ********** **** ****** of *****.

Overall ******* ****** ***** ** ** **

******* ******* ****** *** Hikvision *** ****** **% in ** ****, ******** to ~**% ** ** 2018. **** ****** **** a ***** **** ******* the *** ******** *** not ********* *** *** a ********* ******** ******* domestic *** ******** *** the ********.

Construction ******** ********* ***%

** *** ******** **** for *********, ** ***** domestically, ** **** ***** 'construction', *.*., *********** ******** more **** ******* **** over ****.

** ** ***** **** ~5% ** ***** ******* and ** ***** ****** but ***** *********'* ******** inside ** *****.

Net ******* ***** ******

******* ******* ******* ****** falling ******* ** **, increased ******* ******** *** decreased ************* ***** *******, Hikvision's ******* ******** *** profit ****** ********* **** 19.4% ** **.*% **** Q1 ** **. **** points ** * ****** domestic ******.

AI ******* #* ********

****** ****, ********* ********** ***** priority ** **:

***** ********* ** *** ethics *** ******** ** Hikvision's ** *** *********, all ***** ***** ** strong ***** ******** ********** sales *** ***** ** products. ******* ** *****, Hikvision's ** ****** ** far **** ************, ****, e.g., ********* **********, ***** not ******* ** *** US, nearly * **** **** after **** ****** *********** ****'* *******.

Roller ******* ***** *****

**** *** **** ****, Hikvision's *****'* **** *** been * ****** *******, with ****** ******** ** 2017, ******** ** **** turn ** ****:

** **********, *** ***** drop ******* **** ***** coincides **** ********* **** of *** ** ********** taking ******* ******* *********.

Future ** ************* ********* ********?

 

** *** *** ****, Hikvision *** ****** ** money ** ******** ** fund *** ************* ******** as ***** ******** ******** dominance *******. ** *** other ****, ****** ********* can ******* *** ***** margin ******* *** ****** the **** ** ******* expenses, ** **** **** under ********** ******** ** reduce *** ****** ***************.

******, *********'* ********* ** a *** **** ***** own ****** *** *** been ***************** "****** '******** ** *********' in ******". *** **** **** Hikvision ** **********?

Comments (13)

Update: The US House and Senate have published their reconciliation report. Dahua and Hikvision ban still remains:

We are currently researching the details of this but, minimally, this is an important step forward for the ban.

Note: the wording (above) has changed and is broader than before (now mentions, e.g. critical infrastructure, which is often not government owned, e.g. utilities). We are also examining that element.

now mentions, e.g. critical infrastructure, which is often not government owned, e.g. utilities

We do work on utilities.  I would be very surprised that Hik or Dahua would/could ever be installed at, say, a substation or wind farm.  The only way I could see them accidentally being installed there is if they somehow were buried under an OEM such as Panasonic or Bosch.  There is a lot of regulatory compliance already.

We do work on utilities. I would be very surprised that Hik or Dahua would/could ever be installed at, say, a substation or wind farm.

Evidently, that message has not processed by Hikision who is clearly targeting utilities with their thermal cameras and other industrial offerings.

Did not know Hytera was in the mix, thanks. That's the only two-way radio alternative to Motorola I know of - are there any other alternates? Moto is difficult to work with if you're not a partner.

Hytera was included in the original House amendment from May.

I created a new discussion: Two-Way Radio Alternatives To Motorola? for that. Thanks!

There are others, but I am a Motorola dealer and would do my best to be easy to work with.  Feel free to reach out to me.

Bloomberg covers Hikvision: Chinese Spygear Titan's Ready to Recover $11 Billion Market Loss

It is generally a positive article from the perspective of the prospect of the stock price increasing.

However, it does mention Hikvision acknowledging both domestic issues ("a nationwide campaign to curtail debt was crimping government spending") and international ones ("Intensifying scrutiny from the U.S. and Europe on Chinese firms with ties to Beijing may discourage new clients.").

Interestingly, one analyst claims that investors are betting on Hikvision's software development capabilities:

“AI is more related to the software analytics capability that the company is providing and has a higher technology barrier. It’s more than just selling the hardware,” said Rex Wu, an analyst with Jefferies. “That’s why investors like the company and gave it a higher valuation.”

For their sake, hope it gets better than DeepInMind...

Hikvision has unfortunately moved down a level. They went from "completely anihilating the competition" to "simply giving everyone an azz whoopin" 

I gave you a funny vote, Sean.

You are on the Hikvision train to the very end, I get it. However, these results show the opposite of an "azz whoopin". When your sales costs are shooting up and your gross margins are plunging, it means you're struggling to win and trying to buy business. It's not sustainable.

Now to be clear, I think can Hikvision can have a sustainable business but not at the ambitions that it has now.

Hikvision Chinese investor call recap has some interesting details:

The growth of the distribution business in overseas markets tends to be flat. The project market has made progress in some countries and regions but in other countries, it faces trade policy

International manufacturers cut prices. AxisHoneywell’s price is also quite obvious.It is expected that such a competitive process will continue for some time.

The company's forecast for the first three quarters of performance growth remains in the range of 15% to 35%If the external environment changes a lot, it will affect our expectations of performance.

Growth rate of front-end products. Some are affected by overseas marketsBusinesses like the US and Australia currently due to some political factors. Slightly slow. The better these two areas are mainly these products. So the reaction grows at the front end.This is an overseas situation..

At present, the tariff is increased by 10%.,We think the impact is not too bigStill within an affordable range.But if you say this tax goes to 20%,Even 30% to add,That will definitely still affectIn fact, I mentioned in the very early days that I want to add 25% tariff. We did a very serious evaluation at the time Is to transfer the entire manufacturing industry to the United States. Then, because the policy of this tariff did not fall as soon as it was said so the middle stopped again.

The exchange rate has a little impact. About 2 points. The rest are other aspects of the impact.

We did a very serious evaluation at the time Is to transfer the entire manufacturing industry to the United States.

Yes, by adding assembly lines to the numerous Chinese consulates nationwide.

Dahua is going to be sooo pissed!

So John - can you speak specifically to the Dahua listing by the Federal Government? I would have to believe that most vendors that push a "less expensive" line are embedding the Dahua products. I know it's quite prevalent (sensor and processor wise) - or used to be - in the offerings of FLIR DNZ-30 product line (their low-cost PTZ camera). I would be interested to find out what the impact is overall.

 

specifically to the Dahua listing by the Federal Government? 

Which 'listing' are you referring to?

it's quite prevalent (sensor and processor wise) - or used to be - in the offerings of FLIR DNZ-30 product line (their low-cost PTZ camera)

Those products were OEMed from Dahua. However, earlier this year, FLIR sold off their SMB / Lorex (Dahua OEM business effectively) to Dahua.

Read this IPVM report for free.

This article is part of IPVM's 6,592 reports, 889 tests and is only available to members. To get a one-time preview of our work, enter your work email to access the full article.

Already a member? Login here | Join now

Related Reports

Uniview H1 2020 Financials Examined on Sep 08, 2020
While Dahua and Hikvision, helped by fever camera sales, are recovering from...
ADT Slides Back, Disappointing Results, Poor Commercial Performance on Aug 06, 2020
While ADT had an incredible start to the week, driven by the Google...
Dahua Revenue Grows But Profits Down, Cause Unclear on Oct 20, 2020
While Dahua's overall revenue was up more than 12% in Q3 2020, a significant...
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...
Worst Manufacturer Technical Support 2020 on Oct 15, 2020
4 manufacturers stood out as providing the worst technical support to ~200...
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...
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...
2020 Mid Year Video Surveillance Industry Guide on Jul 27, 2020
The first half of 2020 has been shocking, for the world generally, and for...
Worst Over But Integrators Still Dealing With Coronavirus Problems (June Statistics) on Jun 30, 2020
While numbers of integrators very impacted by Coronavirus continue to drop,...
Facial Recognition: Weak Sales, Anti Regulation, No Favorite, Says Security Integrators on Jul 07, 2020
While facial recognition has gained greater prominence, a new IPVM study of...
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...
Salesforce Drops Dahua and Hikvision on Aug 12, 2020
Salesforce has dropped Dahua and Hikvision as customers, forcing the two mega...
Costar Technologies / Arecont H1 2020 Financials Examined on Sep 16, 2020
Costar's financial results have been hit by the coronavirus with the company...
FLIR Stock Falls, Admits 'Decelerating' Demand For Temperature Screening on Aug 07, 2020
Is the boom going to bust for temperature screening? FLIR disappointed...
VSaaS Will Hurt Integrators on Aug 06, 2020
VSaaS will hurt integrators, there is no question about that. How much...

Recent Reports

ISC Brasil Digital Experience 2020 Report on Oct 23, 2020
ISC Brasil 2020 rebranded itself to ISC Digital Experience and, like its...
Top Video Surveillance Service Call Problems 2020 on Oct 23, 2020
3 primary and 4 secondary issues stood out as causing the most problems when...
GDPR Impact On Temperature / Fever Screening Explained on Oct 22, 2020
What impact does GDPR have on temperature screening? Do you risk a GDPR fine...
Security And Safety Things (S&ST) Tested on Oct 22, 2020
S&ST, a Bosch spinout, is spending tens of millions of dollars aiming to...
Nokia Fever Screening Claims To "Advance Fight Against COVID-19" on Oct 22, 2020
First IBM, then briefly Clorox, and now Nokia becomes the latest Fortune 500...
Deceptive Meridian Temperature Tablets Endanger Public Safety on Oct 21, 2020
IPVM's testing of and investigation into Meridian Kiosk's temperature...
Honeywell 30 Series and Vivotek NVRs Tested on Oct 21, 2020
The NDAA ban has driven many users to look for low-cost NVRs not made by...
Ubiquiti Access Control Tested on Oct 21, 2020
Ubiquiti has become one of the most widely used wireless and switch providers...
Avigilon Aggressive Trade-In Program Takes Aim At Competitors on Oct 20, 2020
Avigilon has launched one of the most aggressive trade-in programs the video...
Mexico Video Surveillance Market Overview 2020 on Oct 20, 2020
Despite being neighbors, there are key differences between the U.S. and...
Dahua Revenue Grows But Profits Down, Cause Unclear on Oct 20, 2020
While Dahua's overall revenue was up more than 12% in Q3 2020, a significant...
Illegal Hikvision Fever Screening Touted In Australia, Government Investigating, Temperature References Deleted on Oct 20, 2020
The Australian government told IPVM that they are investigating a Hikvision...
Panasonic Presents i-PRO Cameras and Video Analytics on Oct 19, 2020
Panasonic i-PRO presented its X-Series cameras and AI video analytics at the...
Augmented Reality (AR) Cameras From Hikvision and Dahua Examined on Oct 19, 2020
Hikvision, Dahua, and other China companies are marketing augmented reality...
18 TB Video Surveillance Drives (WD and Seagate) on Oct 19, 2020
Both Seagate and Western Digital recently announced 18TB hard drives...