Author: Poetry and Starry Sky ID: SingingUnderStars

Recently, Hangzhou's "Six Little Dragons" have frequently graced our screens, prompting numerous netizens to ponder why their own cities lack similar technological marvels.

Indeed, most cities not only lack "Six Little Dragons" but also an ancient AI giant: Hikvision.

Many may have forgotten that Hikvision was once a prominent AI concept stock, specializing in CV (Computer Vision). Today, AI conversations often center around generative large models, but Hikvision's legacy remains significant.

Hangzhou's "Six Little Dragons" are a testament to years of accumulation and inheritance, not an overnight success.

As a state-owned enterprise, Hikvision embodies the essence of Hangzhou, having become a global leader in the CV field.

In January 2021, Hikvision announced the spin-off of NVR, which was successfully listed on the STAR Market in December 2022.

Hikvision's core business revolves around security cameras. With advancements in security technology, Hikvision has bridged the gap between police and civilian applications.

For instance, technology that identifies behaviors such as not wearing a seat belt or smoking while driving at high speeds proves practical in home cameras, monitoring visitors outside or pets inside.

While Hikvision has traditionally dominated the G-end and B-end markets, it established the NVR brand to cater to C-end customers, expanding into new market territories.

Leveraging its deep technological prowess in G-end and B-end, the NVR series has gained immense popularity since its market launch.

This is the inevitable path for similar enterprises. Despite the profitability of G-end and B-end businesses, as enterprises scale, they inevitably encounter growth stagnation. The solution lies in C-end development.

A renowned saying by Xingkongjun echoes this sentiment: Great enterprises must be To C.

01

NVR's Flash Report

On February 21, 2025, NVR released its 2024 annual performance flash report.

Data Source: iFind

In 2024, the company achieved a total operating revenue of 5.4 billion yuan, up 12.41% year-on-year, indicating substantial market expansion and business growth.

Total profit stood at 540 million yuan, down 5.02% year-on-year; net profit attributable to shareholders was 500 million yuan, down 10.52% year-on-year; and non-deductible net profit was 480 million yuan, down 12.63% year-on-year.

The company finds itself in a vicious cycle of increasing revenue without corresponding profit growth.

There are four primary reasons for this profit decline:

Firstly, significant marketing expenses for new products. According to the company's semi-annual and third-quarter reports, NVR expanded into new markets for smart home cameras, smart locks, household and commercial cleaning robots, and smart wearables in 2024. These new smart products are still in their nascent stages of market development. To establish brand influence for the company's various core product lines domestically and internationally, marketing expenses have surged, compressing profit margins.

Secondly, intensified market competition. The smart home field is highly competitive, with numerous enterprises vying for market share. This fierce competition has led to product price compression, while market promotion and customer acquisition costs have risen. To maintain market share, NVR has had to invest more resources in competition, impacting net profit.

Thirdly, product structure adjustment and a decline in gross margin. In 2024, the company's product structure adjustment contributed to a decrease in the overall gross margin.

Fourthly, increased R&D investment. Combining the semi-annual and third-quarter reports, R&D investment in the first half of 2024 amounted to 422 million yuan, accounting for 16.35% of operating revenue. In the first three quarters of 2024, R&D expenses totaled 618 million yuan, accounting for 15.59% of total revenue. Both figures represent significant increases compared to the same period last year. It is anticipated that R&D investment will remain high in the fourth quarter, further affecting profits.

02

Market Breakthrough

Transitioning from the security market to the smart home market, NVR faces both advantages and significant disadvantages. This market is already dominated by popular brands like Huawei and Xiaomi across all price ranges. The brand value accumulated by Hikvision in G-end and B-end markets cannot be effectively transferred to the C-end market. Hikvision's original channel network primarily comprises offline dealers, whereas C-end sales predominantly occur online.

In the announcement, the company stated that continuously launching competitive products and expanding and optimizing domestic and international channel construction are key drivers behind the steady growth of operating revenue. For example, the company actively deploys in new markets for smart home cameras, smart locks, household and commercial cleaning robots, and smart wearables, continuously expanding omni-channel retail channels and enhancing brand influence.

To bolster product strength, the company has increased R&D investment in products such as smart home cameras, smart locks, and cleaning robots, and actively expanded domestic and international market channels. In the first half of 2024, R&D investment amounted to 422 million yuan, accounting for 16.35% of operating revenue. Continuous R&D investment helps enhance product competitiveness and lays the foundation for the company's long-term development, but it also increases costs in the short term.

The newly expanded smart products are still in their early stages of market development, and increased marketing expenses have led to a decline in net profit.

03

Challenges and Opportunities

The intensified competition in the smart home field and rising market promotion and customer acquisition costs are putting pressure on the company's net profit. Simultaneously, the company faces risks related to product development, intellectual property protection, and the scarcity or loss of professional talent.

Xingkongjun believes that Hikvision's establishment of NVR was an attempt to forge a second growth curve. However, NVR has primarily inherited technology from Hikvision, with limited synergistic effects from the brand and dealer channels. Judging by NVR's development since its spin-off and listing, the growth rate of this second growth curve has been less than satisfactory.

According to the prospectus and recent financial reports, the company claims strong competitiveness in the smart home and connected cloud platform fields, possessing multiple core self-developed product lines. With technological innovation, market expansion, and ecological cooperation, it aims to further consolidate its leading position in the smart home and IoT fields. The company also stated that it will continue to deepen technological innovation, expand the smart home ecosystem, and intensify international efforts, with a focus on developing European, American, and Southeast Asian markets.

-END- Disclaimer: This article is based on the public attributes of listed companies and analysis conducted with the core basis of information publicly disclosed by listed companies in accordance with their legal obligations (including but not limited to interim announcements, periodic reports, and official interactive platforms). Poetry and Starry Sky strives to ensure the fairness of the content and opinions contained in the article but does not guarantee its accuracy, completeness, or timeliness. The information or opinions expressed in this article do not constitute any investment advice, and Poetry and Starry Sky will not bear any responsibility for any actions taken based on this article.

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