\u3000\u3 China Vanke Co.Ltd(000002) 835 Shenzhen Tvt Digital Technology Co.Ltd(002835) )
Key investment points
Security video surveillance is a leading enterprise with steady growth in performance
The company is positioned as a global and reliable provider of video surveillance products, technologies and solutions. It focuses on the R & D, manufacturing and sales of security video surveillance products, hard disk video recorders, cameras and video surveillance platforms. At present, it has formed a business system that pays equal attention to both front and rear development and gradually provides overall solutions. It ranks 27th in the list of "global security top 50" in 2021 released by a & S and is a leading enterprise in the security video surveillance industry. The company's revenue increased from 522 million yuan in 2017 to 788 million yuan in 2020, with a CAGR of 14.71%. The corresponding attributable net profit also increased from 20.45 million yuan to 70.65 million yuan, with a CAGR of 51.17%. The performance increased steadily. In 2021q3, the revenue was 658 million yuan (+ 24.35%), and the attributable net profit after deduction was 48.74 million yuan (- 23.42%), which was mainly due to the obvious rise in the price of upstream raw materials such as chips and exchange losses.
Overseas benefit from order transfer in the US market, which is expected to bring greater performance flexibility
In 2019, the US Department of Commerce listed 28 Chinese enterprises as "entity list", including 8 Chinese AI enterprises; In June 2021, the Federal Communications Commission (FCC) preliminarily approved a proposal to prohibit five enterprises (Huawei, ZTE, Hangzhou Hikvision Digital Technology Co.Ltd(002415) , Zhejiang Dahua Technology Co.Ltd(002236) , Hytera Communications Corporation Limited(002583) ) from selling specific telecommunications and monitoring equipment to the United States. The trade friction between China and the United States in recent years has affected the business of China's leading security enterprises in the U.S. market to a certain extent.
Shenzhen Tvt Digital Technology Co.Ltd(002835) is mainly produced and sold in ODM mode. The products are mainly sold to Asia, Europe, North America and other regions. In recent years, the proportion of overseas revenue has remained above 90%. Under the background of Sino US trade friction, the company is expected to benefit from the order transfer in the U.S. market. In the first three quarters of 2020, the revenue growth in the U.S. region was 38%, exceeding the overall revenue growth of 16.69%, which verified the trend of order transfer in the U.S. market. 2021h1 did not disclose detailed data from the United States, but the revenue growth rate in overseas markets was 42.95%, exceeding the overall revenue growth rate of 41.48%, which can also verify the logic of order transfer to some extent. In 2020, the overseas revenue of China's top two leading security enterprises was 28.183 billion yuan. We assume that the U.S. market accounts for 10% of the overseas business, corresponding to the market size of 2.818 billion yuan (due to the unknown impact, it does not mean that all the U.S. market will be lost). The company's revenue in 2020 was only 788 million yuan, and the transfer of orders in the U.S. market will bring great performance flexibility to the company.
Continue to increase R & D investment, focus on AI technology and improve core competitiveness
The company attaches importance to R & D investment. From 2018 to 2020, the R & D expenses were 88.1 million yuan, 106.11 million yuan and 125.56 million yuan respectively, reaching a new high year by year. The R & D expense rates were 14.45%, 16.68% and 15.93% respectively. In the first three quarters of 2021, the R & D investment was 1.02 yuan, a year-on-year increase of 16.01% and the R & D expense rate was 15.51%. It is rare for such a small-scale enterprise to invest so much in R & D. It mainly focuses on the following aspects: 1) increase the research and development of AI intelligent algorithms and products, and strengthen the application ability of AI projects in China and overseas SMB small and medium-sized project markets. In 2021, 40% of camera products will have AI ability, and it will be mentioned to 60-80% in 2022; 2) Create an AI hardware ecosystem, open AI algorithms and business application interfaces, meet the unique needs of various industries, and accelerate the implementation and application of AI algorithms in various industries; 3) In the face of complex international environment, develop backup chip platform to supply products required by different overseas market policies; 4) Continuous investment includes key technologies in various dimensions, such as cloud platform and big data, network security and privacy. With high R & D investment, the competitiveness of the company's products has been improved.
Profit forecast
It is estimated that the company's EPS from 2021 to 2023 will be 0.36, 0.53 and 0.66 yuan respectively, corresponding to 34, 23 and 18 times of the current share price PE. We are optimistic about the performance opportunities brought by the company's continuous R & D investment into the product harvest period and the adjustment of trade policies to the company's orders. We will cover it for the first time and give it a "recommended" investment rating.
Risk tips
Macroeconomic downside risk, risk of product R & D and promotion falling short of expectations, risk of intensified market competition, risk of decline in market demand and gross profit margin, risk of Sino US trade friction, risk of order transfer in the US market falling short of expectations, risk of exchange rate fluctuations, risk of rising raw material prices, risk of repeated epidemics, etc.
