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海康威视
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电子元器件行业
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2015-09-23
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33.40
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17.44
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--
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37.36
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11.86% |
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38.47
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15.18% |
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详细
Initiating with Buy, with 44% potential share price upside to our TP at CNY46 . Five reasons why we are more optimistic than the Street There is a significant growth opportunity in the video surveillance industry, and we believe Hikvision should be one of the major beneficiaries of new demand for smart city and IoT (Internet of Things) applications, the ongoing upgrade product cycle, and consolidation of the industry. We forecast a 2015-2018 CAGR of 41% in sales and 39% in EPS for Hikvision, with ROE rising from 36% in 2014 to 43.6% in 2018. Its solid home-base advantage in China, successful overseas market expansion, and rising net cash position should boost its earnings upside and share price performance. Five reasons why we are more optimistic than the Street . (1) Exciting opportunity for smart city and IoT business: Investors may underestimate the demand for video surveillance applications in the smart city and IoT markets. We expect this segment’s sales contribution to increase from 12% in 2014 to 25% in 2018 (sales CAGR of 70%). (2) Robust upgrade demand for its front-end (analog to IP cameras, 2015- 2018E sales CAGR of 44%) and back-end (DVR to NVR, 2015-2018E sales CAGR of 37%) products plus integrated software lead to our higher 2016- 2018 OPM forecasts of 26.1-26.7% than the Street’s 25-26%. (3) Ongoing market share gains in China (on a sales basis) from 28% in 2014 to 48% in 2018E, helped by its competitive sales footprints, its solid relationships with system integrators and commercial customers, and the government’s encouraging policies for safe city and Made in China 2025. (4) Successful overseas market expansion for its brand business in 20 countries, ahead of Chinese peers, further boosting its EPS momentum. (5) Potential growth in other security business (access control, total solution). Valuation and risks . We base our valuation of CNY46 on 19x our 2016E EPS, which is lower than Hikvision’s historical P/E (23x) since 2011 (when it became a total solutions supplier). Our 10-year DCF valuation model suggests a fair price of CNY51. Downside risks: weaker demand, order loss to peers, and inventory.
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