The $12 Billion Video Surveillance Manufacturer

By John Honovich, Published Apr 15, 2014, 12:00am EDT

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.

The $12 billion video surveillance manufacturer is Hikvision [link no longer available], whose market capitalization went over $16 billion in fall of 2013. Hikvision, though is not alone.

Chinese peer, Dahua [link no longer available], has a market capitalization of $5.5 billion USD.

Hikvision and Dahua Growth Rates and Revenue

Both of the companies now have astronomical revenue levels and almost unbelievable growth rates:

First, here is Dahua, the 'smaller' of the two:

In 3 years, Dahua has gone from less than $250 million to close to $1 billion. They are growing at an annual rate of 50%+. Plus, their net profitability percentage is at a whopping 21%, far higher than the surveillance industry norm of ~10%.

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Now, here is Hikvision:

In 3 years, Hikvision has gone from just over a half billion to approaching two billion. They are growing at annual rate of 45% plus last year alone grew revenue by more than $550 million (to put that in perspective, that is the equivalent of 3 Avigilon's). Plus, their net profitability is almost an impossible to believe 28% (e.g., way higher than Google's).

Drivers and Future

Undoubtedly, the main driver of revenue and growth for both companies is the domestic China market, where both companies generate ~80% of their revenue. And it comes significantly from mega city / government projects that they have huge advantages in obtaining. This also likely includes payment for integration services / labor, skewing it against 'pure play' manufacturers. Plus, the question remains how long China will continue to spend on such surveillance systems.

However, equally clearly, both companies are using their experience, resources and scale to launch global expansions where they are offering some of the least expensive surveillance products on the market. And with the Western surveillance market's innovation 'slump, it is easier for ever for them to make gains.

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