In this Research Note, we examine the half-year financial results, ending 30th June 2022 for the major Chinese video surveillance giants, Hikvision (Hangzhou Hikvision Digital Technology Co., Ltd.) and Dahua Technology (Zhejiang Dahua Technology Co. Ltd.) in the context of previous results, their overall strategies, growth and Memoori market analysis. This Note is based on company financial reports for the half-year 2022, 2021 Annual Reports and Memoori’s latest report on the Physical Security Business 2021 to 2026.
The world’s two leading manufacturers of video cameras, Dahua and Hikvision alone generated revenues of over $16.7 billion in 2021. The average selling price of cameras is significantly lower in China than in other markets due to intense price competition, meaning that on a unit basis, China is deploying more cameras annually than the US and more than the rest of the world combined. So much so, that China is rapidly catching up with the US and Europe in terms of penetration stated in terms of the number of cameras per capita. The government is also not a neutral player in the market, holding a 42% stake in Hikvision and providing the company with favourable lending terms and debt facilities.
Memoori comments that Dahua and Hikvision are in a different league to the remainder of the suppliers in the video surveillance market in terms of sales volumes, accounting for at least 40% of the world market, while the 3rd largest Chinese firm, Uniview is also a major global player. All have achieved astonishing growth during the last 4 years.
The rapid growth of Hikvision and Dahua is due to their strategy of establishing solid domestic market positioning followed by the expansion of their global operations, focusing on price competition to displace much of the revenue being generated by established domestic suppliers. According to Hikvision’s 2021 Annual Report, the leading supplier reported revenues of RMB 81.42 billion (USD 11.74 billion), with a YoY increase of 28.21%.
According to the Half-Year Earnings Report Hikvision released on 13th August 2022, the firm generated a revenue of RMB 37.26 billion, up 9.90% year over year. Net profits attributable to shareholders of the listed company were RMB 5.76 billion, reflecting a YoY decrease of 11.14%. The firm does not plan to pay a cash dividend following the decline in first-half net profit due to the increased cost of stockpiling parts amid supply chain concerns.
In the first half year of 2022, the severe situation of epidemic prevention and control brought continuous challenges to the domestic economy. Between March and May, the Chinese market was hit by Covid-19 outbreaks that impacted the company’s business, which picked up in June. Domestic revenue accounted for RMB 25.54 billion, 68.6% of total revenues, and a YoY growth of 4.54%.
Hikvision achieved a revenue of RMB 11.71 billion in overseas markets during the reporting period, with a YoY growth of 23.72%, despite encountering negative public opinion in the market. Overseas sales accounted for 31.4% of total revenues in H1 2022, increasing from 27% in 2021. However, China’s domestic market remains key to the company’s growth momentum.
According to Zhejiang Dahua Technology’s 2021 Annual Report, the supplier reported revenues of RMB 32.835 billion (USD 4.98 billion), with a YoY increase of 24.07%. In the last three years, Dahua Technology's revenue has grown by 38.75%, from RMB 23.67 billion. In 2022, analysts are expecting revenue to reach RMB 36.13 billion, an increase of 10.03%.
The company reported H1 2022 revenue of RMB 14.087 billion, a 4% increase over the same period last year and a net profit of RMB 1.52 billion, a decline of 8% compared to the same period last year. Domestic demand is under pressure as repeated Covid-19 outbreaks impacted the company’s business. Domestic revenues in the first half-year declined 6% to RMB 7.296 billion.
Overseas business in H1 2022 increased 19% year-on-year to RMB 6.791 billion, accounting for 48% of total revenues. Dahua is less reliant on Chinese-based sales than Hikvision and is a significant OEM supplier to a number of American-based camera suppliers.
Despite growing geopolitical tensions, trade barriers and human rights concerns, the two PRC video surveillance giants are becoming increasingly dependent on foreign markets.
This article was written by Daphne Tomlinson, Senior Research Associate at Memoori.