Hikvision's Huge IPO Examined

•Published May 28, 2010 00:00 AM

PUBLIC - This article does not require an IPVM subscription. Feel free to share.

This note examines the financial details and competitive contrast of Hikvision's May 2010 IPO. This is an extremely large and noteworthy IPO for the video surveillance space.

The Shenzhen Stock Exchange reports [link no longer available] Hikvision's 2009 revenue as $310 Million USD and net profits of over $100 Million USD. Annual revenue is similar to Axis. Profit, if correct, would be significantly higher.

40 Million shares were issued on the first day of trading (2010-05-08) at approximately $10 USD each (for a total raise of $400 Million). The stock price jumped 20% that day [link no longer available]. 10 million additional shares will be issued over the next 3 months.

The Shenzhen Stock Exchange reports a total of 500 million shares for Hikvision's overall market capitalization with only 40 million currently trading (negotiable).

The overall valuation of Hikvision stands at $6 Billion USD at the end of the first day of trading (i.e., market capitalization of 500 million shares x $12 per share). See Chinese finance textbook on market cap. vs negotiable market cap. This valuation would be ~6x greater than Axis's valuation.

Additionally, Hikvision is trading at nearly 60x earnings - a robust number. With earnings at about $100 Million, this metric also places Hikvision's valuation at approximately $6 Billion USD.

This is likely a good indicator of the exuberance and growth of the Chinese market more so than the overall video surveillance market.

While Hikvision's historical strength is in the analog market and its home base of China (see our 2009 Hikvision company overview), Hikvision has been clear about their intentions to expand internationally and into IP video (see Hikvision's 'dream of branded business' and their Europe/Russian expansion efforts).

In February 2010, we tested their 2MP IP camera and found it to suffer from a number of serious flaws. It will be interesting to see how quickly and well Hikvision can improve their IP products to be competitive in the world market.