德意志銀行–Hikvision:Near-term risks should have been priced in【公司研究】_研報(yanbao)

【研究報告內容摘要】

Near-term risks should have been priced in

In-line 2Q18 results Hikvision reported in-line 2Q18 results and expected 1-3Q18 profit to grow in the same range of 15-35% YoY. Despite a continued negative impact from the Chinese government’s deleveraging policy and political/economic uncertainties in overseas markets, we believe Hikvision’s short-term softness is temporary and order momentum could pick up again, with uncertainties easing over time and a healthier industry dynamic in the domestic market. Maintaining Buy.

In-line 2Q18 results

Hikvision reported 2Q18 EPS and operating profit of CNY0.25 (+28% QoQ, +29% YoY) and CNY2.0bn (-3% QoQ, +1%YoY), on sales of CNY11.5bn (+23% QoQ, +22% YoY). Sales/gross profit were broadly in line with DB/consensus estimates, as the market has already factored in the political impacts. However, expenses rose in 2Q18, due to 1) rising recruitment fees for sales people and R&D engineers, 2) higher exhibition fees and 3) one-time expense for the third phase of industrial park opening in Hangzhou. With help from a non-op gain, net profit slightly missed DBe by 4%.

Slower 1-3Q18 guidance but long-term outlook remains intact

Hikvision expects 1-3Q18 net profit to rise 15%-35% YoY, implying 3Q18 net profit of CNY2.9bn-4.2bn, or a midpoint of CNY3.5bn (+24% YoY). Although a solid figure, this guidance trails Bloomberg consensus (CNY3.8bn) by 8%, due to 1) the economic/political uncertainties in overseas markets, 2) the continual impact of the Chinese government’s deleveraging policy, and 3) the small public security projects being squeezed by the nationwide projects in the short run. Aside from this, Hikvision remains positive on its 2018 and long-term outlook, noting: 1) the innovation business posted 80% YoY growth in 1H18 and the high growth will continue; 2) a rising contribution from the Sky Net/Sharp Eyes projects as Hikvision is the key beneficiary of the Chinese government’s efforts to build a nationwide security surveillance system; and 3) its rising AI system integration can drive long-term ASP upside.