Hikvision Posts Solid Financial Results for First Half of 2017

Hikvision credits investment in R&D as fundamental to its growth from 2001 to present.

HANGZHOU, China — Hikvision posted year-over-year double-digit increases in operating income and net profit during the first half of 2017, the company announced on its website.

From Jan. 1 to June 30, Hikvision said its total operating income was $2.4 billion (RMB ¥16.45 billion), which represents a year-over-year increase of 31% compared to $1.8 billion (RMB ¥12.55 billion) in the first six months of 2016.

Net profit attributed to Hikvision shareholders in the first half of 2017 is up 26% over last year. The 2017 total is $487 million (RMB ¥3.29 billion), compared to $386 million (RMB ¥2.6 billion) the year prior.

The global video surveillance provider posted an overall gross profit margin of nearly 43% percent in the first half of 2017, up 1.14% over last year’s gross profit margin for the same time period.

Hikvision is a publicly traded company, listed on the Shenzhen Stock Exchange. Earnings per share (EPS) rose 23% in the current reporting period, amounting to 5 cents (RMB ¥0.357) in 2017 compared to 4 cents (RMB ¥0.288) in 2016.

Bloomberg reported this week in the seven months since China started a trading link between Hong Kong and Shenzhen, the top stock purchases of overseas investors have been Hikvision, Gree Electric Appliances and Midea Group Co. Each of the three companies has risen more than 50% this year, despite the Shenzhen Composite Index retreating 6% overall.

Net profit reported by Hikvision on July 21 missed analysts’ consensus for the third consecutive quarter, according to data compiled by Bloomberg. Its shares trade at 34x earnings, the highest since June 2015. Billy Feng at UBS Group AG downgraded the stock to a sell this month, his second cut in less than four months, according to Bloomberg. Current valuation suggests at least 35% earnings growth in the coming three years, a challenging outlook given slower China growth and rising competition, Feng suggested.

Hikvision credits investment in R&D as fundamental to its growth from 2001 to present. In the first half of 2017, R&D investment rose 50% compared to the year prior. In 2017 to date, Hikvision has invested more than $215 million in R&D; it invested more than $143 million in the first six months of 2016.

“North America is one of the regions around the world that contributes to the growth of Hikvision, and we are building momentum with the establishment this year of the first Hikvision R&D Centre located outside of China, the Montreal R&D Centre,” says Jeffrey He, president of the company’s operations in the United States and Canada. “The new R&D Centre means we’re bringing more high-skill, good-paying jobs to our communities. We’re tapping the tremendous talent pool in the Montreal area and over the next few years we expect to have more than 100 research and development engineers based in Montreal.”

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