2Q24 The company's overall performance was steady, and revenue and net profit after deduction increased year-on-year. 2Q24 achieved revenue of 23.39 billion yuan (YoY +9.46%, QoQ +31.28%); net profit due to mother of 3.148 billion yuan (YoY -10.73%, QoQ +64.32%), after deducting non-attributable net profit of 3.483 billion yuan (YoY +0.02%, QoQ +97.85%), due to the cancellation of equity incentives in the second quarter, a one-time fee of 0.471 billion yuan, resulting in a difference between net profit and net profit attributable to mother Large. Furthermore, the gross profit margin was 44.51% (YOY-0.69pct, QoQ-1.25pct), and the overall performance remained resilient.

EBG maintained year-on-year growth driven by companies' demand to improve quality and efficiency. In the first half of the year, EBG maintained growth resilience, with revenue of 7.49 billion yuan, an increase of 7.05% over the previous year. Apart from smart buildings, the eight sub-businesses of industrial enterprises, petrochemicals, coal, education and teaching, electricity, finance, commerce, steel, non-ferrous metals, culture and sports all continued to grow. With the initial completion of the intelligent IoT strategic transformation, industry intelligence gradually became a development initiative. Through the expansion of online and offline channels and product categories, SMBG's revenue was 5.789 billion yuan, an increase of 0.64% over the previous year. PBG was under overall pressure, with revenue of 5.693 billion yuan, a decrease of 9.25% over the previous year. Among them, due to local government financial constraints, the public security and traffic police industries continued to decline, and businesses supported by treasury bonds, such as water conservancy and water services, disaster prevention and relief, and emergency management, were relatively steady.

The share of developing countries continued to rise, and innovative businesses increased 26% year over year. Overseas business maintained good growth in the first half of the year, with revenue of 14.1 billion yuan, up 17.5% year on year. Developing countries accounted for nearly 70%. Excluding the influence of the US market, the four regions of America, Pan-Europe, Pan Asia Pacific, and the Middle East and Africa all achieved growth. Driven by factors such as overseas business expansion and cycle growth, the innovative business grew the fastest, with revenue of 10.328 billion yuan, up 26% year on year; among them, storage business and automotive electronics achieved a year-on-year growth rate of more than 60%, robotics and thermal imaging business increased by more than 20% year on year, AGVs and industrial cameras in the robotics business grew rapidly, and domestic trillion treasury bonds in emergency management brought about growth in the thermal imaging business.

Digitalization of the enterprise scenario brings long-term growth momentum, and multi-dimensional perception of product growth brings about business expansion. According to data from Roland Berger and Huawei, the potential value of digitalization in industries such as manufacturing, finance and insurance, retail, energy and electricity is above 2 trillion US dollars, and the digitalization of the enterprise scenario will become a continuous growth engine. In terms of business content, Hikvision has expanded from visible light to sensing fields such as X-ray, infrared, ultrasound, and radar, and integrated applications of various sensing technologies. The product has evolved from focusing on changes in human behavior in the past to obtaining scene information and solving specific problems through sensing products, and the breadth of business has gradually opened up.

Investment advice: We are optimistic about the long-term growth momentum brought about by the company's operational resilience and industry intelligence. In the short term, considering the macroeconomic recovery and PBG growth rate in the first half of the year, the 24-25 PBG revenue and gross margin level will be lowered. The net profit for 24-26 is 14.6/16.5/18.5 billion yuan (previous value: 16.3/18.1/19.5 billion yuan), corresponding to the 24-26 PE of 18/16/14 times, maintaining a “superior to the market” rating.

Risk warning: Macroeconomic growth falls short of expectations, and overseas demand growth falls short of expectations.