occurrences
Hikvision released its report for the third quarter of 2024. In the first three quarters of 2024, the company achieved revenue of 64.991 billion yuan, a year-on-year increase of 6.06%; net profit to mother of 8.108 billion yuan, a year-on-year decrease of 8.40%; net profit after deducting non-attributable net profit of 8.151 billion yuan, a year-on-year decrease of 3.67%; and gross margin of 44.76%, a year-on-year decrease of 0.09pct. In the third quarter of 2024, the company achieved revenue of 23.782 billion yuan, a year-on-year increase of 0.33%; net profit to mother of 3.044 billion yuan, a year-on-year decrease of 13.37%; net profit after deducting non-return to mother of 2.908 billion yuan, a year-on-year decrease of 15.11%; and gross margin of 44.25%, a year-on-year decrease of 0.07pct.
Domestic demand is under pressure, and overseas markets are stable
In terms of the main domestic business, PBG's revenue growth rate in the third quarter was positive. Businesses such as water conservancy, disaster prevention and relief, and emergency management continued to be supported by treasury bonds, funding sources were guaranteed, and government business continued to grow; EBG maintained slight year-on-year growth in the third quarter, and digital demand aimed at reducing corporate costs and efficiency was still active; SMBG's negative growth in the third quarter was obvious, and the company took the initiative to reduce inventory for dealer partners. In terms of major overseas businesses, growth continued in the third quarter, but the growth rate slowed down, and revenue growth in all four major business centers was positive. The innovative business was affected by domestic demand. The growth rate declined from the first half of the year, and businesses such as Microfilm, automotive electronics, and fire protection grew faster.
Business is expected to gradually improve with fiscal policy support
On October 12, the Ministry of Finance stated at the press conference of the State Information Office that, on the basis of speeding up implementation of established policies, it will launch a package of targeted incremental policy measures in the near future. The company's traditional PBG business, such as public security and traffic police, is affected by local financial pressure. Water conservancy, disaster prevention and relief, emergency management and other industries have been supported by special treasury bonds to achieve order growth. With the implementation of the incremental fiscal policy, the company's business is expected to gradually improve.
Investment advice
Considering the short-term pressure on downstream demand, we expect the company's revenue for 2024-2026 to be 95.141/105.552/118.236 billion yuan, with year-on-year growth rates of 6.49%/10.94%/12.02%, respectively, and net profit to mother of 14.288/16.598/18.796 billion yuan, respectively, 1.28%/16.17%/13.24%, EPS 1.55/1.80/2.04 yuan/share, respectively, for 3 years The CAGR is 10.04%. Given that the company is a global leader in the security field, business is expected to gradually improve with fiscal policy support and maintain a “buy” rating.
Risk warning: geopolitical environment risk; domestic economic structural transformation risk; supply chain risk; technology upgrading risk; exchange rate fluctuation risk.