The $12 Billion Video Surveillance Manufacturer

By: John Honovich, Published on Apr 15, 2014

What video surveillance manufacturer is worth a staggering $12 billion USD?

How about Avigilon? Avigilon is growing very fast and, impressively, has broken a billion dollar valuation, but is still worth only 1/10th of this behemoth.

Axis? Getting warmer but still way off. Axis valuation is close to double that of Avigilon's, at $2 billion USD, but still not anywhere close to this manufacturer.

**** ***** ************ ************ is ***** * ********** $12 ******* ***?

*** ***** ********? ******** is ******* **** **** and, ************, ********* * ******* ****** valuation, *** ** ***** worth **** */**** ** this ********.

****? ******* ****** *** still *** ***. **** valuation ** ***** ** double **** ** ********'*, at $* ******* ***, but ***** *** ******** close ** **** ************.

[***************]

*** $** ******* ***** surveillance ************ ***********, *********** ****************** **** $** ******* in **** ** ****. Hikvision, ****** ** *** alone.

******* ****,*****, *** ******* **************** $*.* ******* ***.

Hikvision *** ***** ****** ***** *** *******

**** ** *** ********* now **** ************ ******* levels *** ****** ************ growth *****:

*****, **** ** *****, the '*******' ** *** two:

** * *****, ***** has **** **** **** than $*** ******* ** close ** $* *******. They *** ******* ** an ****** **** ** 50%+. ****, ***** *** profitability ********** ** ** a ******** **%, *** higher **** *** ************ industry **** ** ~**%.

***, **** ** *********:

** * *****, ********* has **** **** **** over * **** ******* to *********** *** *******. They *** ******* ** annual **** ** **% plus **** **** ***** grew ******* ** **** than $*** ******* (** put **** ** ***********, that ** *** ********** of * ********'*). ****, their *** ************* ** almost ** ********** ** believe **% (*.*., *** higher **** ******'*).

Drivers *** ******

***********, *** **** ****** of ******* *** ****** for **** ********* ** the ******** ***** ******, where **** ********* ******** ~80% ** ***** *******. And ** ***** ************* from **** **** / government ******** **** **** have **** ********** ** obtaining. **** **** ****** includes ******* *** *********** services / *****, ******* it ******* '**** ****' manufacturers. ****, *** ******** remains *** **** ***** will ******** ** ***** on **** ************ *******.

*******, ******* *******, **** companies *** ***** ***** experience, ********* *** ***** to ****** ****** ********** where **** *** ******** some ** *** ***** expensive ************ ******** ** the ******. *** **** the ******* ************ ******'* innovation '*****, ** ** easier *** **** *** them ** **** *****.

Comments (21)

Good to read this.. Uniview could be the next one.

Thanks for the point about Uniview. Anyone have any color on them? I know they spend a fair amount of money to have a big booth next to Axis at ISC West 2014.

What's their plan / approach for the Western markets?

The only thing I heard is about its investor, the Bain Capital.

We have been a Bosch/Radionics dealer for 20+ years (primarily with intrusion and a little video), we've installed many video systems from Bosch over the years and have been disappointed each time.

Last September a Hikvision rep came by and asked us to start selling their products. My first thought was, HIK! Vision? WTF! I thought it was some kind of joke. But then I saw the price point and build quality of the Cameras, NVRs and apps/software.

We have been very pleased with the systems. I've sold 20+ hikvision NVR's (have one small system going in as we speak), with very few problems. Some of the older firmware was kind of sketchy but they seem to have all of my major problems ironed out and have added features that I and others have requested quickly. I have virtually abandoned Bosch and Axis with few exceptions, I had one camera that died shortly after install but they sent out a replacement the same day.

We've installed these systems in homes, fuel stations, small transportation hubs and large retail stores. The customers who are looking for a simple solution without analytic support love this system, its no surprise to me that Hikvision is growing. Personally I am a huge advocate but we will see if they can continue to gain momentum and build their brand in the US market. The surveillance industry is a relatively small world and anyone can come out ahead. Relatively speaking a $2B (revenue) company isn't that big.

Good feedback. Hikvision has and continues to be the OEM for many of the big American 'brands' / conglomerates so it will be interesting to see how that plays out with them now facing head to head.

Not too far behind is Flir at just under $5B in market cap and I believe last year they were #2. What is interesting is that both Zhejiang Dahua Technology Co Ltd and Hangzhou Hikvision Digital Technology Co Ltd have dropped dramatically, almost to half their value in the past 6 months and are on a downward spiral. What do you think is attributing to their rapid decline?

But can you go by revenue & market cap to define their significance in security. If that was our main measure the clearly Sony with 19B market cap would be higher than than Dahua and Hikvision and they make surveillance cameras and their sensors and components are used by other camera manufacturers.

Then if you go by security companies only, then Assa Abloy at close to $19B would be larger than Hikvision + Dahua. At least it would be a better investment as they are rising in value.

I am not saying that Hikvision and Dahua are the most 'significant' companies but they are, by market capitalization, among surveillance focused companies, by far, the biggest.

Comparing to Sony or Samsung or Panasonic is simply silly because only a fraction of what they do is in security / surveillance.

As for FLIR, only about 35% of their revenue is from their surveillance segment (see page 66 of their 2013 10K).

Ultimately, the point is less about how 'bad' other companies but how huge Hikvision and Dahua have gotten in short order.

"What is interesting is that both Zhejiang Dahua Technology Co Ltd and Hangzhou Hikvision Digital Technology Co Ltd have dropped dramatically, almost to half their value in the past 6 months and are on a downward spiral. "

-- This is interesting.. Any official data to support this?

Probably from the same place the author gets it's information from the stock exchange. Here's one link to Bloomberg, for the graph, just click on 1Y to see the valuation chart for the past year.

Hikvision quote

Dahua quote

And at the rate Avigilon has been declining over the last 3 months, they will be out of business by mid 2015.

This is silly.

Stocks go up and down.

Equally importantly, tech stocks have been trending downward recently.

Over the last 5 months, Axis is -20%, Dahua -36%, Hikvision -32%.

That said, over the last 12 months, Hikvision is up 18%, Dahua is up 7%, Axis is up 26%.

I do think eventually Hikvision and Dahua need to cool down and that they have real risk of being so heavily concentrated in mega Chinese government projects.

That said, the past year's trend shows net positive growth for all, hardly a sign of a 'downward spiral'.

At least it would be a better investment as they are rising in value.

Did you intend to say would have been a better investment as they have risen in value, or the copy as it stands?

I'm not a big investor other than retirement portfolio but I would tend to buy stock in a company that has sustained growth and losing 1/3 of you market cap in 6 months would be a red flag for me but some may see that opportunity, sort of bargain shopping. You can blame market conditions, but if that was so, why is the Shanghai Composite Index pretty much stable over the same time going up/down maybe 5% difference between today and 6 months ago. Look at it this way, our Dow Index is about 16K, if it dropped 1/3rd in 6 months to about 10K, some may call it a recession.

SSE (Shanghai Composite Index) is not heavily tech. Members include banks, utilities, shipping, insurance companies and the like. The Shenshen Stock Exchange (SZSE) is a bit more tech-heavy. It has been in a mild downtrend since the beginning of 2013. Still, China in general has not experienced the wide swings that the U.S. and European markets have (either up or down).

I'm taking your second answer as affirming your first. :)

Nothing of what you have said is out of line per se, it's just that the mixing of meat products with dairy products is, as Ari has caused me to learn, not kosher. In this case the blending of verfiable historical data (meat) with similar sounding yet actually forward looking statements (dairy) is not easily digested. Example:

Hikvision Digital Technology Co Ltd have dropped dramatically, almost to half their value in the past 6 months and are on a downward spiral

The first part up to the bold are verifiable, and the second would seem to be the same except for its subtle verb tense change to the present, which makes it unclear if you are just being inexact or prognosticating a continued downward arc. Along the same lines the statement:

At least it would be a better investment as they are rising in value.

leaves us wondering if the 'rising' has happened or will happen, and if the latter, that you are really indicating that we should long Assa and short Hikvision. Which now I'm assuming you are. I'm going 'all in' myself now. :)

My estimate of half was just a rough look at the chart showing a downturn since October, but a more precise look shows it's down about a 1/3rd, still not something I would consider for investment but I do like their cameras.

John, very interesting! Makes you really wonder where these two may be heading.

Just as an observation the 2013 "cost of goods sold" for Hikvision shows zero, thus showing a "gross profit" = "total revenues". The net income figure seems ok, though. Probably a typo in the excel spreadsheet... thanks Alberto

Alberto, Good eye! Thanks.

I copeid that from Businessweek's financial summary. I've now whited the gross profit part out because its missing the related COGS figure.

Good Read. Great Info.

Normally I would pass on both companies. Last quarter i got an value HIK 3MP didn’t think much to the quality of the camera or the build but it was definitely on sale for 160 bucks and I had to try it to see how bad it really was.

I would really like to see better chips and sharper images out of all CCTV manufactures.

All bets on their stock price and valuations aside, if they can continue to sell 3MP cameras at CDN$150 they will definitely grab market share. We have them testing right now, though they certainly are not an Axis or Samsung camera, they do give one pause at that price point. They are better than half the camera for half the price.

You think they are half the camera of Axis or Samsung? We just replaced brand new underperforming Mobotix D15 cameras that cost about $1,200 each with Hikvision USA that cost $330 and money was not a factor in the decision. They are definately disrupting the established players. We replaced Axis top of the line PTZ at one customer with Dahua because of poor quality control of the Axis plastic domes and they couldn't be happier. I think it's a wakeup call to the status quo that quality can come from mainland China. I think it's cool you can get Hikvision in Canada a lot cheaper than what Hikvision USA charges.

We have talked to both HikVision and Dahua regarding OEM componets from them.

I'm very impress about their performance. They listen to us as a customer and do custom adaptations according to our specifications. And we are not a very big customer.

This is the opposite to what we experience from Japanese component suppliers. They are very interested in our business, but it seems that they have lost their agility.

Quality wise we do of course do internal validation of them all. Our experience is that HikVision has a very good build quality and that it's at least as good as Axix. In some cases better. The response time has also been incredebly short when we have requested componets.

From my point of view there is no doubt that both Dahua and HikVision will be in the forefront in the comming years. Political issues might halt them. As I understand, HikVision has som tight connections to the government in China. Dahua claims to be totaly privately operated.

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