Hikvision: Performance Stalled, R&D Downsized, Can AI Save the Day?
Hikvision released its 2024 annual report and Q4 financial results (as of March 2025) after A-share market close on April 18, 2025 Beijing time. Key points:
1. Overall Performance: Continued Slump. $HIKVISION(002415.SZ) achieved revenue of 18.5 billion yuan in Q1 2025, up 4% YoY. With sluggish domestic operations, growth mainly came from innovation businesses; Net profit attributable to shareholders reached 2 billion yuan, up 6.4% YoY. Despite cost-control measures, profit recovery remains constrained by weak downstream demand.
2. Business Segments: No Improvement in Domestic Operations. All three domestic business groups declined in H2 2024. Public Service Group (PBG) saw double-digit contraction—the worst performer—while Enterprise Business Group (EBG) and SME Group (SMBG) also declined. Innovation businesses maintained double-digit growth as the primary driver.
3. Hardware-Software Integration: Volatile Software, Stable Hardware. Since transitioning from surveillance hardware to integrated solutions, Hikvision maintains this model. Dolphin Research estimates software revenue fell to ~20% of total in H2 2024. While hardware growth slowed, it remained positive unlike software.
Overall View: Persistent Weakness, No Turnaround Yet.
Q1 revenue saw slight growth, but gross margin kept declining. Innovation businesses offset domestic declines, resulting in single-digit growth.
Annual data shows slowing growth in both innovation and overseas businesses, with no domestic recovery. PBG hit 5-year lows due to government fiscal constraints; EBG/SMBG weakened further. Inventory reduction reflects soft demand.
R&D headcount dropped in 2024—first decline ever—signaling cost control. While this may boost short-term profits, sustainable growth requires revenue acceleration.
The company pins hopes on AI transformation via its "Guanlan" model, though impact remains limited.
Amid economic headwinds, market expectations have lowered, with shares range-bound. Focus now centers on operational recovery and AI monetization. Progress here could restore confidence; otherwise, stagnation persists.
Dolphin Research's Detailed Analysis:
1. Key Metrics: Ongoing Weakness
1.1 Revenue: 18.5B yuan (+4% YoY), driven by innovation/overseas segments.
1.2 Gross Margin: 8.3B yuan (+2.1% YoY), with margin down 0.9ppt to 44.9%.
1.3 Operating Expenses: 5.93B yuan (+1.9% YoY), with ratios stable at 32%.
1.4 Net Profit: 2.04B yuan (+6.4% YoY), with net margin at historic lows (12%).
2. Segment Breakdown
Core products (76% of H2 revenue) fell 5.5%, while innovation businesses (24%) grew 17.3%.
3. Hardware vs. Software
Estimated software revenue dropped 7.6% (20% of total), while hardware edged up 0.9%.
Related Reports by Dolphin Research:
2024-10-28: Hikvision: Layoffs as a Lever
2024-08-17: No "Equipment Renewal" Boost
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