In recent years, the security industry has entered a golden period of rapid development, boosted by continued economic growth and the demand brought by various events such as the Olympics and World Expo. In order to take the initiative in the highly competitive market, many security companies have entered the capital market and turned to become listed companies. What are the deep reasons behind it and what impact has the listing brought to the company?
The security industry is now listed on the wave of investors
With the industry leader Hikang Weishi landing on the SME Board on May 28, the total number of security listed companies on the A-share market has reached 33. Previously, Hanwang Technology, Taiji, Zhongrui Sichuang, Ningbo GQY, Warburg shares, Saiwei intelligence and development of seven cross-border enterprises in the security industry were listed on the A-share market during the year. A wave of listing tides.
Among them, most new security stocks have been favored by investors. Hanwang Technology, which was listed on the Shenzhen Stock Exchange on March 3, gained nearly 100% on the first day, and then it rushed to a high of 175 yuan, ranking the first high-priced stocks in the two cities. As of November 5, the average increase rate of the eight companies since their IPOs reached 31.63%, while the Shanghai and Shenzhen 300 Index fell by 1.5% over the same period, and the SME Index’s index rose by 27%.
In addition, 25 security companies listed before 2010 had an average increase of 32% during the year and the overall performance exceeded the market by nearly 34%. Calculated according to the complex price, Dahua shares rose 132% during the year and was the best performing stock. The stock price of HKUST News nearly doubled. Investors' preference for security companies is evident.
Security demand continues to grow rapidly Industry players welcome golden opportunity
The favor of investors for security companies mainly comes from the good development prospects of the industry. As China is currently in an important stage of economic and social transformation, the frequent population movements and the complexity of security precautions have been continuously improved. The security awareness of enterprises and the public has continued to increase, and the demand for security products has grown rapidly. The large cities such as Ping An City, the Olympic Games, the World Expo and the Asian Games have attached great importance to security work and have directly stimulated the demand for security products. Among them, the security investment in the Beijing Olympic Games exceeds 2 billion yuan, accounting for 1/5 of the entire Olympics budget; and the direct budget of the Guangzhou Asian Games security investment is also close to 1 billion yuan.
This is followed by changes in the supply and demand of the labor market in China, and rising manpower costs. Many companies are facing labor shortage problems. In the field of security, video surveillance and other technical precautions can significantly reduce the demand for labor, improve monitoring efficiency and monitoring effectiveness. Taking Guangzhou as an example, at present, there are 268,000 video surveillance cameras built in Guangzhou, which basically cover the effective coverage of major public places and road sections from the city's main roads to the streets and alleys. According to statistics from the Guangzhou Police, since the year of 2006, the police have used criminal security video surveillance systems to capture 15,800 criminals and captured an average of 4,000 people each year.
According to estimates by China Merchants Securities, the average annual growth rate of China's video surveillance market in the next five years is expected to be more than twice the growth rate of GDP. The market is generally expected that in the future, as China's economic development and people's living standards improve, the security industry will maintain a rapid development trend. Therefore, it is not surprising that investors favor the security companies.
Listed, or not listed? This is a problem
Only good prospects do not seem to explain the enthusiasm of companies for listing, because from a corporate perspective, listing brings both opportunities and costs. Indeed, many companies have expanded their brand influence through listing, have improved their corporate governance and capital strength, seized the opportunity to quickly become the industry leader, and brought huge returns to investors, such as the Vanke of the real estate industry.
However, after being listed as a public company, the company must disclose its financial statements and major business information in a timely and accurate manner, and expose all its actions to its competitors. This is not a must for companies, especially those in the fiercely competitive industries. Do not consider the impact.
Moreover, due to the fact that it is a listed company, if negligence or wrong decisions are made, it may lead to the loss of controlling shares and the company's overtaking of others. This year's war on control of Gome has reminded many entrepreneurs that they must first understand the rules of the market and the capital operation before going public.
Furthermore, there are also many companies that have become arrogant after the IPO and have blindly explored new businesses that do not have obvious advantages. This has led to “multiple deteriorationâ€; or, due to the temptation of capital, they have frequently cashed in, and have no intention of doing business. The company was finally eliminated by ST and others for the development of the industry.
When interviewed by Liu Xiang, vice president of Hikvision, he also stated that the capital market environment is constantly changing, and that it takes costs to standardize the system before the company's listing and to maintain the listing status thereafter. Therefore, the company must make clear what the listing is for and must have long-term strategic planning and preparation. Unprepared companies are easily marginalized even if they are listed.
The degree of competition is still fierce giants influx to bring greater pressure
In fact, at present, the urgent pursuit of listing companies by security companies is more related to the competition in the industry. According to Hikvision's prospectus, there are about 15,000 domestic security companies and 90% of small businesses with annual sales of less than 10 million yuan. As product homogeneity is serious, price reduction has become the only competitive means for small and medium-sized manufacturers. The technical threshold for the manufacture of security terminal equipment is low. Crazy price wars and low value-added competition have caused many industry enterprises to fall into the Red Sea.
On the other hand, IT industry giants and foreign security companies have also entered the security market. Zhong Wei Li Wei, general manager of Wei Wei recently said that in addition to consolidate the traditional advantages and market share in the field of telecommunications security, will also focus on public security, rail transportation, environmental protection and other areas of increased capital investment and market promotion.
In recent years, IT, communications giants such as Philips, Microsoft, Intel, Cisco, China Mobile have entered the security market in different ways. Seagate waited for storage drives for the surveillance industry, Telecom launched the “Global Eye,†and Cisco teamed up with Tsinghua University to develop network intelligence solutions. The water in the security market seems to be getting mixed up.
As many SMEs are defeated in the competition, the industry will usher in a round of reshuffle. Currently, in the DVR field, the market shares of three leading listed companies, Hikvision, Dahua, and Dali Technology, total more than 70%. Since the remaining market space is already small, other companies may not be able to be squeezed out in the future if they do not take full advantage of listing strength.
Industry development pattern, profound changes in capital, business model transformation
So what kind of impact can the listing bring to the company? Of course, the most direct is to raise a huge sum of money. The average initial fundraising amount of 8 security companies listed this year reached 1.08 billion, and the average net assets of these 8 companies in 2009 were only 335 million yuan. Take Hanwang Technology as an example, its initial public offering amounted to 1.13 billion yuan, while the company had net assets of 250 million yuan at the end of last year, and its book cash was only 180 million yuan. The size of the company suddenly turned several times.
However, in order to analyze its impact in depth, it is necessary to proceed from many aspects such as the status quo and trends of the industry. First of all, fundraising can help the company to enhance its R&D capabilities and establish a large sales service network to achieve economies of scale. Security products are electronic products, which have the characteristics of rapid development of technology and fast update. Its life cycle is short, generally 3-5 years, and there is a period of overlap between new and old products, and the actual effective life cycle is shorter.
Therefore, to maintain a competitive advantage, companies must first ensure technology leadership and continuously introduce new products that meet market needs. Among the industry companies, Dahua currently has more than 400 R&D teams, while Hikvision has more than 600 people, accounting for nearly one-third of the company's total.
Among Hikvision's fundraising projects, there are two technology industrialization projects and a new R&D center project. Its two fund-raising industrialization projects have already begun to realize profits. The total profit in the first three quarters was about 170 million yuan.
In addition, since Haikang is taking a customized route, the downstream is more dispersed, and it needs a strong R&D, rapid response and continuous service, it is necessary to establish a huge sales service network and a sound R&D platform. If non-listed capital is raised, the accumulation of the company's own development alone is almost impossible to support these platforms, and it will also drag the company to seize the opportunity in the era of rapid technological change.
In addition, the brand value and influence of the listing will also increase. There are only a few brands in the industry that are called names. In the past, due to the lack of core technology innovation and customer channels, many companies have followed the road of imitation and have limited profit margins. Through brand management, product technology innovation and design improvement will be more easily perceived by users, and differentiated competition will be able to unfold slowly.
At present, there are already more than 120 million Chinese shareholders, and families will be affected even more. The roadshow before the listing, the performance on the first day of listing and the subsequent changes in the stock price all attracted the attention of the market. After understanding, familiarity, and finally love of the brand and become its investors, these thousands of shareholders have become the company's living sign and volunteer promoters.
Taking Hanwang Technology as an example, it has attracted widespread attention from the beginning of its listing. From the development of e-book technology, the popularity of sales, and the advancement of face recognition systems, investors’ arguments are spreading rapidly, just like user word of mouth. Hanwang has been promoted from an industry brand to a market brand, and many people who have never been in touch with electronic paper books are also familiar with the name of Hanwang. This brand awareness and influence has enabled Hanwang to win the favor of many channel providers and help Hanwang quickly establish a channel for security products.
Finally, the listing will also help the company better grasp the industry trends and demand changes. Through analyzing the investment projects of 8 enterprises, we can find that there are mainly three aspects of their investment. The first is high-speed rail, highway and urban rail transit. The game is planned to be invested in the intelligent urban rail transit system project and the high-speed railway informatization digitization system project. The development of the technical development is planned for a new generation of highway toll comprehensive service platform project.
According to research by Essence Securities, the average investment per kilometer in the high-speed rail field video surveillance system is about 200,000 to 300,000 yuan, and the total mileage of high-speed rail projects in China in 2012 is 13,000 kilometers. In the past two years, high-speed rail is used for video surveillance systems. Investment will reach 2.6 billion yuan. The annual new demand for expressway and subway construction is between RMB 3-4 billion and RMB 2-3 billion respectively.
The second is the application of the Internet of Things. The representative project is the electronic merchandise anti-theft radio frequency soft label and RFID transponder project of China Ruisi Chuang. Due to the wide use of the Internet of Things, it covers a wide range of areas such as intelligent transportation, environmental protection, government work, and public safety. Its development will inevitably bring endless business opportunities to the security industry.
The third is the development of foreign markets. At present, the global security market is worth over 700 billion U.S. dollars, and it is expected that it will reach hundreds of billions U.S. dollars in 2013. The leading domestic enterprises are expected to open up foreign markets further through technological upgrading, brand building and the most important marketing network construction.
There are two overseas logistics and technical service center projects in Hikvision's fundraising projects. The company had previously established subsidiaries in Russia, the United Arab Emirates, the Netherlands, and initially established an overseas sales system. In terms of operating results, Hikvision saw a 67% year-on-year increase in operating income in the first three quarters of the year, and net profit increased by 38% year-on-year. Hanwang Technology's revenue in the first three quarters of the year increased by 203% year-on-year, and net profit increased by 105% year-on-year. The earlier-listed Dahua shares also achieved 85% and 135% growth in their revenue and net profit for the same period.
Although there are also a few companies that perform poorly, it is not unreasonable that companies with “capital†accelerators are more comfortable in the industry competition. Looking into the future development of the industry, the “testing†listing may still be the choice of many security companies that are struggling in the Red Sea to seek upgrading and transformation.
The security industry is now listed on the wave of investors
With the industry leader Hikang Weishi landing on the SME Board on May 28, the total number of security listed companies on the A-share market has reached 33. Previously, Hanwang Technology, Taiji, Zhongrui Sichuang, Ningbo GQY, Warburg shares, Saiwei intelligence and development of seven cross-border enterprises in the security industry were listed on the A-share market during the year. A wave of listing tides.
Among them, most new security stocks have been favored by investors. Hanwang Technology, which was listed on the Shenzhen Stock Exchange on March 3, gained nearly 100% on the first day, and then it rushed to a high of 175 yuan, ranking the first high-priced stocks in the two cities. As of November 5, the average increase rate of the eight companies since their IPOs reached 31.63%, while the Shanghai and Shenzhen 300 Index fell by 1.5% over the same period, and the SME Index’s index rose by 27%.
In addition, 25 security companies listed before 2010 had an average increase of 32% during the year and the overall performance exceeded the market by nearly 34%. Calculated according to the complex price, Dahua shares rose 132% during the year and was the best performing stock. The stock price of HKUST News nearly doubled. Investors' preference for security companies is evident.
Security demand continues to grow rapidly Industry players welcome golden opportunity
The favor of investors for security companies mainly comes from the good development prospects of the industry. As China is currently in an important stage of economic and social transformation, the frequent population movements and the complexity of security precautions have been continuously improved. The security awareness of enterprises and the public has continued to increase, and the demand for security products has grown rapidly. The large cities such as Ping An City, the Olympic Games, the World Expo and the Asian Games have attached great importance to security work and have directly stimulated the demand for security products. Among them, the security investment in the Beijing Olympic Games exceeds 2 billion yuan, accounting for 1/5 of the entire Olympics budget; and the direct budget of the Guangzhou Asian Games security investment is also close to 1 billion yuan.
This is followed by changes in the supply and demand of the labor market in China, and rising manpower costs. Many companies are facing labor shortage problems. In the field of security, video surveillance and other technical precautions can significantly reduce the demand for labor, improve monitoring efficiency and monitoring effectiveness. Taking Guangzhou as an example, at present, there are 268,000 video surveillance cameras built in Guangzhou, which basically cover the effective coverage of major public places and road sections from the city's main roads to the streets and alleys. According to statistics from the Guangzhou Police, since the year of 2006, the police have used criminal security video surveillance systems to capture 15,800 criminals and captured an average of 4,000 people each year.
According to estimates by China Merchants Securities, the average annual growth rate of China's video surveillance market in the next five years is expected to be more than twice the growth rate of GDP. The market is generally expected that in the future, as China's economic development and people's living standards improve, the security industry will maintain a rapid development trend. Therefore, it is not surprising that investors favor the security companies.
Listed, or not listed? This is a problem
Only good prospects do not seem to explain the enthusiasm of companies for listing, because from a corporate perspective, listing brings both opportunities and costs. Indeed, many companies have expanded their brand influence through listing, have improved their corporate governance and capital strength, seized the opportunity to quickly become the industry leader, and brought huge returns to investors, such as the Vanke of the real estate industry.
However, after being listed as a public company, the company must disclose its financial statements and major business information in a timely and accurate manner, and expose all its actions to its competitors. This is not a must for companies, especially those in the fiercely competitive industries. Do not consider the impact.
Moreover, due to the fact that it is a listed company, if negligence or wrong decisions are made, it may lead to the loss of controlling shares and the company's overtaking of others. This year's war on control of Gome has reminded many entrepreneurs that they must first understand the rules of the market and the capital operation before going public.
Furthermore, there are also many companies that have become arrogant after the IPO and have blindly explored new businesses that do not have obvious advantages. This has led to “multiple deteriorationâ€; or, due to the temptation of capital, they have frequently cashed in, and have no intention of doing business. The company was finally eliminated by ST and others for the development of the industry.
When interviewed by Liu Xiang, vice president of Hikvision, he also stated that the capital market environment is constantly changing, and that it takes costs to standardize the system before the company's listing and to maintain the listing status thereafter. Therefore, the company must make clear what the listing is for and must have long-term strategic planning and preparation. Unprepared companies are easily marginalized even if they are listed.
The degree of competition is still fierce giants influx to bring greater pressure
In fact, at present, the urgent pursuit of listing companies by security companies is more related to the competition in the industry. According to Hikvision's prospectus, there are about 15,000 domestic security companies and 90% of small businesses with annual sales of less than 10 million yuan. As product homogeneity is serious, price reduction has become the only competitive means for small and medium-sized manufacturers. The technical threshold for the manufacture of security terminal equipment is low. Crazy price wars and low value-added competition have caused many industry enterprises to fall into the Red Sea.
On the other hand, IT industry giants and foreign security companies have also entered the security market. Zhong Wei Li Wei, general manager of Wei Wei recently said that in addition to consolidate the traditional advantages and market share in the field of telecommunications security, will also focus on public security, rail transportation, environmental protection and other areas of increased capital investment and market promotion.
In recent years, IT, communications giants such as Philips, Microsoft, Intel, Cisco, China Mobile have entered the security market in different ways. Seagate waited for storage drives for the surveillance industry, Telecom launched the “Global Eye,†and Cisco teamed up with Tsinghua University to develop network intelligence solutions. The water in the security market seems to be getting mixed up.
As many SMEs are defeated in the competition, the industry will usher in a round of reshuffle. Currently, in the DVR field, the market shares of three leading listed companies, Hikvision, Dahua, and Dali Technology, total more than 70%. Since the remaining market space is already small, other companies may not be able to be squeezed out in the future if they do not take full advantage of listing strength.
Industry development pattern, profound changes in capital, business model transformation
So what kind of impact can the listing bring to the company? Of course, the most direct is to raise a huge sum of money. The average initial fundraising amount of 8 security companies listed this year reached 1.08 billion, and the average net assets of these 8 companies in 2009 were only 335 million yuan. Take Hanwang Technology as an example, its initial public offering amounted to 1.13 billion yuan, while the company had net assets of 250 million yuan at the end of last year, and its book cash was only 180 million yuan. The size of the company suddenly turned several times.
However, in order to analyze its impact in depth, it is necessary to proceed from many aspects such as the status quo and trends of the industry. First of all, fundraising can help the company to enhance its R&D capabilities and establish a large sales service network to achieve economies of scale. Security products are electronic products, which have the characteristics of rapid development of technology and fast update. Its life cycle is short, generally 3-5 years, and there is a period of overlap between new and old products, and the actual effective life cycle is shorter.
Therefore, to maintain a competitive advantage, companies must first ensure technology leadership and continuously introduce new products that meet market needs. Among the industry companies, Dahua currently has more than 400 R&D teams, while Hikvision has more than 600 people, accounting for nearly one-third of the company's total.
Among Hikvision's fundraising projects, there are two technology industrialization projects and a new R&D center project. Its two fund-raising industrialization projects have already begun to realize profits. The total profit in the first three quarters was about 170 million yuan.
In addition, since Haikang is taking a customized route, the downstream is more dispersed, and it needs a strong R&D, rapid response and continuous service, it is necessary to establish a huge sales service network and a sound R&D platform. If non-listed capital is raised, the accumulation of the company's own development alone is almost impossible to support these platforms, and it will also drag the company to seize the opportunity in the era of rapid technological change.
In addition, the brand value and influence of the listing will also increase. There are only a few brands in the industry that are called names. In the past, due to the lack of core technology innovation and customer channels, many companies have followed the road of imitation and have limited profit margins. Through brand management, product technology innovation and design improvement will be more easily perceived by users, and differentiated competition will be able to unfold slowly.
At present, there are already more than 120 million Chinese shareholders, and families will be affected even more. The roadshow before the listing, the performance on the first day of listing and the subsequent changes in the stock price all attracted the attention of the market. After understanding, familiarity, and finally love of the brand and become its investors, these thousands of shareholders have become the company's living sign and volunteer promoters.
Taking Hanwang Technology as an example, it has attracted widespread attention from the beginning of its listing. From the development of e-book technology, the popularity of sales, and the advancement of face recognition systems, investors’ arguments are spreading rapidly, just like user word of mouth. Hanwang has been promoted from an industry brand to a market brand, and many people who have never been in touch with electronic paper books are also familiar with the name of Hanwang. This brand awareness and influence has enabled Hanwang to win the favor of many channel providers and help Hanwang quickly establish a channel for security products.
Finally, the listing will also help the company better grasp the industry trends and demand changes. Through analyzing the investment projects of 8 enterprises, we can find that there are mainly three aspects of their investment. The first is high-speed rail, highway and urban rail transit. The game is planned to be invested in the intelligent urban rail transit system project and the high-speed railway informatization digitization system project. The development of the technical development is planned for a new generation of highway toll comprehensive service platform project.
According to research by Essence Securities, the average investment per kilometer in the high-speed rail field video surveillance system is about 200,000 to 300,000 yuan, and the total mileage of high-speed rail projects in China in 2012 is 13,000 kilometers. In the past two years, high-speed rail is used for video surveillance systems. Investment will reach 2.6 billion yuan. The annual new demand for expressway and subway construction is between RMB 3-4 billion and RMB 2-3 billion respectively.
The second is the application of the Internet of Things. The representative project is the electronic merchandise anti-theft radio frequency soft label and RFID transponder project of China Ruisi Chuang. Due to the wide use of the Internet of Things, it covers a wide range of areas such as intelligent transportation, environmental protection, government work, and public safety. Its development will inevitably bring endless business opportunities to the security industry.
The third is the development of foreign markets. At present, the global security market is worth over 700 billion U.S. dollars, and it is expected that it will reach hundreds of billions U.S. dollars in 2013. The leading domestic enterprises are expected to open up foreign markets further through technological upgrading, brand building and the most important marketing network construction.
There are two overseas logistics and technical service center projects in Hikvision's fundraising projects. The company had previously established subsidiaries in Russia, the United Arab Emirates, the Netherlands, and initially established an overseas sales system. In terms of operating results, Hikvision saw a 67% year-on-year increase in operating income in the first three quarters of the year, and net profit increased by 38% year-on-year. Hanwang Technology's revenue in the first three quarters of the year increased by 203% year-on-year, and net profit increased by 105% year-on-year. The earlier-listed Dahua shares also achieved 85% and 135% growth in their revenue and net profit for the same period.
Although there are also a few companies that perform poorly, it is not unreasonable that companies with “capital†accelerators are more comfortable in the industry competition. Looking into the future development of the industry, the “testing†listing may still be the choice of many security companies that are struggling in the Red Sea to seek upgrading and transformation.
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