20230417-招银国际-海康威视-002415.SZ-Taking_time_to_recover_11页_1mb

Hikvision (002415 CH) delivered a weaker than expected FY1Q23 performance, with revenue of RMB 16.2 billion (-2% YoY) and net profit of RMB 1.81 billion (-21% YoY). Sequential improvements were noted in revenue and gross profit margin (+1.4 pts YoY), despite higher operating expenses. The decline was attributed to slower COVID-19 recovery, underperformance in segments like Public Security Business Group (PBG) and overseas markets, and initial impact from broader market challenges. However, positives include earnings recovery and the completion of a RMB 2 billion share repurchase.

Management emphasizes focus on quality growth for FY23E, targeting better project profitability through tighter control on headcount and opex. The analyst upgraded the forecast for net margin to 17.7% in FY23E, reflecting business stabilization from the pandemic trough in FY4Q22. Following the muted results, the rating was downgraded to HOLD from previous position, with a maintenance of the target price at RMB 47.29, up from prior levels. The valuation adjustment is based on a higher 27x P/E ratio for FY23E, in line with peer means and expectations of business normalization.

Hikvision's innovative businesses show increased revenue contribution (18% in 2022), with Smart Home AIoT poised as a core growth driver. Overall, the outlook highlights cautious optimism with limited near-term catalysts, emphasizing a slow recovery process.