数字化业务的竞争力从何而来？规模效应，ARPU 数倍案例层出不穷。公司从狭义安防进入场景数字化市场，市场空间提升十倍，但公司在这一领域的竞争力还未被充分认知：一方面，海量数字化场景积累了横向规模效应，500+解决方案、软件和硬件高频复用，公司能够更低成本更高效率满足碎片化需求，实践中单客户价值量数倍提升的案例层出不穷；另一方面，在与各个垂直行业的数字化厂商竞争中，公司构建了“感知技术底座——AI和大数据能力——产品化落地——柔性生产能力”的全链路优势，获得纵向规模效应。公司在数字化市场的规模效应优势，将拉动人效上行，并抬升未来业绩增长中枢。Key points of investment:
This report attempts to answer three hotly debated questions in the market: 1) shareholder returns are increasing at the same time as the company's growth rate is slowing, how to confirm the current margin of safety; 2) whether intelligent IoT and digital scenarios have sufficient growth space and competitiveness as a new growth curve; 3) whether performance and valuation are flexible enough in the new growth stage.
Where does the margin of safety come from? High level and consistent shareholder returns. First, the company has paid dividends every year since its listing in 2010, with a cumulative cash dividend of about 58.4 billion yuan, and the dividend rate increased significantly in 2015/2023, respectively. The latest dividend rate reached 60%, which shows that the company has always attached great importance to shareholder returns. Second, with the company's abundant free cash flow and surplus cash support, we expect the company to maintain a dividend rate of at least 60% over the next three years, and there is room for improvement. Third, taking into account dividend rates and growth, the company currently has an advantage against the Shanghai and Shenzhen 300 and China Securities dividend constituent stocks. The bottom market value calculated from the perspective of dividend rates is close to the present, and the margin of safety will rise significantly over the next two years.
Where does the competitiveness of digital business come from? Due to the scale effect, ARPU is multiplied by several times, and there are endless cases. The company entered the digital market in the narrow sense of security, and the market space has increased tenfold, but the company's competitiveness in this field has not been fully recognized: on the one hand, massive digital scenarios have accumulated horizontal scale effects, 500+ solutions, software and hardware are being reused at high frequency, and in practice, there are endless cases where the value of a single customer has increased several times; on the other hand, in competition with digital manufacturers in various vertical industries, the company has built a full “Perception Technology Foundation AI — Big Data Capability — Productive Implementation — Flexible Production Capacity” Link advantage to obtain vertical scale effects. The company's scale advantage in the digital market will drive the upward trend in human efficiency and boost the future performance growth center.
Where does valuation flexibility come from? Historical valuations are reviewed in detail, and Davis's double click often appears! The company's bottom PE is usually around 20x and is currently at the lowest quantile level in history, reflecting the market's conservative expectations. In fact, 24H1 once again proved its resilience to growth. Water conservancy, water/disaster prevention and relief/emergency management in PBG, most industries under EBG, all regions outside of the US in overseas business, and robotics/automotive electronics/storage/thermal imaging in innovative businesses have all unleashed strong momentum. Referring to 15Q1-15Q2, 17Q1-17Q3, and 20Q3-20Q4, it only takes about 2-3 quarters of valuation to rise from the bottom area of 20x to a high of 40x. Supported by the company's technological growth attributes, valuations are highly flexible if macro-level expectations are repaired or driven by technological change.
First coverage, giving a “buy” rating. We expect the company's net profit forecast for 2024-2026 to be 14.8/17.5/20.3 billion yuan, respectively, up 4.8%/18.3%/16.0% year-on-year, respectively. Using the PE valuation method, comparable companies selected typical domestic digital companies Dahua Co., Ltd., Baoxin Software, and Honeywell, Rockwell, and Schneider, which are typical global digital companies. Considering the market capitalization space for the next year, we chose 2025 as the valuation year. Comparable companies had an average PE of 20x in 2025. According to our profit forecast, Hikvision's net profit for 2025 was 17.5 billion yuan, giving 20xPE, corresponding to a target market value of 350 billion, which covered the “buy” rating for the first time.
Risk warning: 1) the risk of the global economic environment and geopolitics; 2) the risk of structural transformation of the domestic economy; 3) the risk of technological upgrading.
