HIKVISION(SZ:002415) Goldman Sachs·2025-06-15 16:03Investment Rating - The investment rating for Hikvision is Neutral with a 12-month target price of Rmb30.6, reflecting a cautious view on the saturated surveillance market and macro uncertainties [1][13][15]. Core Insights - Hikvision is expected to see a gradual recovery in revenues, projecting a 5% year-over-year growth in 2Q25, reaching Rmb24.7 billion, driven by better seasonality and expansion in overseas and innovative business [1]. - The company is focusing on higher-margin business segments and leveraging AI technology to enhance its product offerings, including the launch of the Guanlan AI Model for complex scenario analysis [2][15]. - Earnings estimates for 2025-2027 have been revised down by 26%, 19%, and 18% respectively, primarily due to lower revenue expectations from the China Public Sector Business (PBG) and Small-medium Enterprise Business (SMBG) [3][7]. Revenue and Earnings Projections - Revenue projections for Hikvision are as follows: - 2025E: Rmb106.4 billion (down 8% from previous estimates) - 2026E: Rmb120.3 billion (down 7%) - 2027E: Rmb130.5 billion (down 7%) [7][17]. - Gross margin (GM) is expected to be 44.1% in 2025, with slight fluctuations in subsequent years [7][11]. Financial Metrics - The projected earnings per share (EPS) for Hikvision are revised to Rmb1.55 for 2025, Rmb1.85 for 2026, and Rmb2.06 for 2027, reflecting a decrease from previous estimates [7][17]. - Operating profit (OP) is expected to decline significantly, with a projected Rmb15.3 billion for 2025, down 28% from earlier estimates [7]. Market Position and Strategy - Hikvision is positioned as a global leader in the surveillance industry, benefiting from potential industry consolidation and expanding into AI surveillance and innovative business areas for long-term growth [15]. - The company is focusing on diversifying its solutions to include emergency response, safe production, and cost-saving measures, while also enhancing its AI capabilities to improve operational efficiency [1][2].