Currently in the advanced stage of industry development represented by digital front-end, the scale will continue to grow rapidly. For equipment suppliers, it is currently on a time window to upgrade to security system developers. Now we think that this kind of business model upgrade has started to happen.
First, the business model upgrade has begun
Currently in the advanced stage of industry development represented by digital front-end, the scale will continue to grow rapidly. For equipment suppliers, it is currently on a time window to upgrade to security system developers. Now we think that this kind of business model upgrade has started to happen.
1. The Pingan City project in the front-end digital era offers opportunities for excellent equipment suppliers.
In the previous in-depth report, we elaborated on the development of the security industry, and believed that the current security industry is in the transition period from the back-end digitization to the front-end digitization. The Safe City project is usually the pioneer of new technologies in the security industry. The current Safe City security system is basically based on the digital front-end. In our previous report, we also believe that in the era of front-end digitization, applications combined with networking and intelligence will increase. Moreover, we have analyzed the input-output ratio of large security systems projects from third-party system developers and equipment suppliers, and the advantages of equipment suppliers are even more obvious. Therefore, we believe that in the Safe City project in the front-end digital era, opportunities for equipment suppliers with security system development capabilities have increased significantly.
2. Intelligent traffic construction is imminent, and video security companies have great potential.
As China's auto consumption has entered a stage of rapid growth, the energy consumption of automobiles is a prominent issue facing the current transformation of economic development methods. At present, China’s oil consumption is second only to the United States and ranks second in the world. China's oil consumption in the transportation industry is second only to industry, accounting for about 25% of total consumption. Each vehicle in the United States consumes 1.8 tons of fuel per year, 1.5 tons in the EU, and 1.1 tons in Japan. China has 2.3 tons of energy, and its energy efficiency is relatively low. In addition, traffic congestion in China's cities has also become increasingly serious. About 30% of gasoline is consumed in traffic jams. In the face of energy, pollution, and congestion problems brought by these transportation industries, the development of intelligent transportation is one of the solutions. Therefore, intelligent transportation and environmental monitoring, traceability of goods, and smart grids constitute the four key areas for the development of the Internet of Things. The advantages of intelligent transportation are obvious. It can improve the efficiency of road use, reduce traffic congestion by about 60%, increase the efficiency of short-distance transportation by nearly 70%, and increase the traffic capacity of existing roads by two to three times. Vehicles travel within the intelligent transportation system, the number of parking stops can be reduced by 30%, travel time can be reduced by 13% to 45%, and vehicle use efficiency can be increased by more than 50%. Intelligent transportation can significantly reduce car energy consumption. Thanks to intelligent traffic control, the fuel consumption of vehicles can also be reduced by 15% due to the reduction in fuel consumption and the reduction in exhaust emissions due to the increase in average vehicle speed. At the same time, the smooth traffic will significantly reduce the vehicle's stagnation time on the road, so that the emissions of automobile exhaust gas will be greatly reduced, thereby improving air quality. According to calculations, every one minute reduction in the idling time of the national automobile engine can reduce the emissions of 1,000 tons of gasoline. Intelligent transportation can effectively reduce traffic accidents. In the country, only one traffic accident resulted in more than 500,000 disabled people and more than 100,000 deaths. Intelligent transportation technology can effectively reduce the occurrence of traffic accidents and reduce the number of deaths caused by traffic accidents by 30% to 70% each year. Through the smart license plate recognition technology, real-time license plate recognition can be performed on the monitored vehicles. This is equivalent to installing a sensor on the vehicle body. The management system can collect vehicle road information in real time. Therefore, for video security companies, they can make a difference.
3, accompanied by business model upgrades
Similarly, in the previous report, we elaborated on the path and conditions for upgrading the business model of the security industry. At present, the dominant equipment suppliers will receive more and more system-level projects due to their enhanced system development capabilities. This means that they have upgraded to security system developers. Moreover, in some special areas such as intelligent transportation, due to the complexity of system construction and maintenance, it is likely that a mature operating mode will be evolved in advance, and the business model of video surveillance equipment manufacturing enterprises will be upgraded once again.
Second, optimistic about the progress of related companies in safe cities and intelligent transportation business
1, optimistic about the progress of Hikvision's development in the Midwest City Safe City project
Due to the limited financial capacity of the government in the central and western regions, the funds for the construction of large safe city projects have a one-time payment ability, and the possibility of using BT or BOT is higher. As of the third quarter of this year, Hikvision had 3.8 billion yuan in cash, which gave it an effective financial support for undertaking major projects in the future with BT and BOT. Moreover, it has a formal financial leasing license and can also leverage bank funds to undertake major projects. Therefore, Hikvision's advantage in terms of funding is unmatched by competitors. Hikvision's largest shareholder is 52, and the actual controller is China Electronics Technology Corporation. All along, it is a star enterprise under China Electronics Technology Group Corporation and is highly valued by the group. We believe that this gives the company an inherent advantage in marketing PR for major engineering projects. Take the safe city construction as an example. In October 2005, the Ministry of Public Security deployed the pilot project for the construction of the national urban alarm and monitoring system (ie the "3111" pilot project). It is expected that the second batch of pilot cities will end by 2010, "3111 workers
Cheng directly invested 10 billion yuan. After 2010, the "3111 project" entered the overall promotion stage and was promoted to each prefecture-level city. The total direct investment was nearly 100 billion yuan. Shaanxi Province made a clear investment of 500 million yuan in the next five years in 2009. Five-channel alarm monitoring and defense line, Chongqing will implement monitoring of all communities by 2012, and code-monitoring of 790,000 urban components. In 2009 and the next three years, Xining City will build an integrated video surveillance platform to realize the construction of 4000 monitoring points. All of the project's common points are driven by the government, so the marketing ability of the government departments is the core element of undertaking these projects.The actual controller of Hikvision is the sub-ministerial unit directly subordinated to SASAC and is undertaking these projects. At that time, there were many communication channels and communication methods with the competent officials of local governments, and the efficiency and effectiveness of their marketing were also unmatched by ordinary private enterprises.In summary, Hikvision's ability to compete with large-scale marketing capabilities We have opened up a big gap for hand-raising, and we are optimistic about its progress in the development of the Safe City project in the Midwest.
2. Intelligent traffic construction is expected to enter a substantive stage
Hikvision and Dahua have been actively preparing for the construction of intelligent transportation in the past two years (for example, Haikang has acquired Shanghai Goldway, which specializes in intelligent transportation). We expect that they should all be negotiating related intelligent transportation projects. As mentioned above, the intelligent transportation project may become a continuous operation project, and the income from the one-time sale of equipment may be extended to continuous operating income. Once they have made breakthroughs in the intelligent transportation project, from the perspective of revenue growth, the UOB shares will be larger (because their current volume is still smaller); in the sense of upgrading the business model, Say it will play a role in improving valuations.
3, optimistic about the future performance of related companies exceeds expectations and valuation increases
We believe that the progress of the safe city and intelligent transportation projects that cannot be accurately predicted at present will bring the performance of related video security companies headed by Hikvision and Dahua to exceed expectations; and the business models brought about by the implementation of these projects. Upgrades will increase their valuation.
First, the business model upgrade has begun
Currently in the advanced stage of industry development represented by digital front-end, the scale will continue to grow rapidly. For equipment suppliers, it is currently on a time window to upgrade to security system developers. Now we think that this kind of business model upgrade has started to happen.
1. The Pingan City project in the front-end digital era offers opportunities for excellent equipment suppliers.
In the previous in-depth report, we elaborated on the development of the security industry, and believed that the current security industry is in the transition period from the back-end digitization to the front-end digitization. The Safe City project is usually the pioneer of new technologies in the security industry. The current Safe City security system is basically based on the digital front-end. In our previous report, we also believe that in the era of front-end digitization, applications combined with networking and intelligence will increase. Moreover, we have analyzed the input-output ratio of large security systems projects from third-party system developers and equipment suppliers, and the advantages of equipment suppliers are even more obvious. Therefore, we believe that in the Safe City project in the front-end digital era, opportunities for equipment suppliers with security system development capabilities have increased significantly.
2. Intelligent traffic construction is imminent, and video security companies have great potential.
As China's auto consumption has entered a stage of rapid growth, the energy consumption of automobiles is a prominent issue facing the current transformation of economic development methods. At present, China’s oil consumption is second only to the United States and ranks second in the world. China's oil consumption in the transportation industry is second only to industry, accounting for about 25% of total consumption. Each vehicle in the United States consumes 1.8 tons of fuel per year, 1.5 tons in the EU, and 1.1 tons in Japan. China has 2.3 tons of energy, and its energy efficiency is relatively low. In addition, traffic congestion in China's cities has also become increasingly serious. About 30% of gasoline is consumed in traffic jams. In the face of energy, pollution, and congestion problems brought by these transportation industries, the development of intelligent transportation is one of the solutions. Therefore, intelligent transportation and environmental monitoring, traceability of goods, and smart grids constitute the four key areas for the development of the Internet of Things. The advantages of intelligent transportation are obvious. It can improve the efficiency of road use, reduce traffic congestion by about 60%, increase the efficiency of short-distance transportation by nearly 70%, and increase the traffic capacity of existing roads by two to three times. Vehicles travel within the intelligent transportation system, the number of parking stops can be reduced by 30%, travel time can be reduced by 13% to 45%, and vehicle use efficiency can be increased by more than 50%. Intelligent transportation can significantly reduce car energy consumption. Thanks to intelligent traffic control, the fuel consumption of vehicles can also be reduced by 15% due to the reduction in fuel consumption and the reduction in exhaust emissions due to the increase in average vehicle speed. At the same time, the smooth traffic will significantly reduce the vehicle's stagnation time on the road, so that the emissions of automobile exhaust gas will be greatly reduced, thereby improving air quality. According to calculations, every one minute reduction in the idling time of the national automobile engine can reduce the emissions of 1,000 tons of gasoline. Intelligent transportation can effectively reduce traffic accidents. In the country, only one traffic accident resulted in more than 500,000 disabled people and more than 100,000 deaths. Intelligent transportation technology can effectively reduce the occurrence of traffic accidents and reduce the number of deaths caused by traffic accidents by 30% to 70% each year. Through the smart license plate recognition technology, real-time license plate recognition can be performed on the monitored vehicles. This is equivalent to installing a sensor on the vehicle body. The management system can collect vehicle road information in real time. Therefore, for video security companies, they can make a difference.
3, accompanied by business model upgrades
Similarly, in the previous report, we elaborated on the path and conditions for upgrading the business model of the security industry. At present, the dominant equipment suppliers will receive more and more system-level projects due to their enhanced system development capabilities. This means that they have upgraded to security system developers. Moreover, in some special areas such as intelligent transportation, due to the complexity of system construction and maintenance, it is likely that a mature operating mode will be evolved in advance, and the business model of video surveillance equipment manufacturing enterprises will be upgraded once again.
Second, optimistic about the progress of related companies in safe cities and intelligent transportation business
1, optimistic about the progress of Hikvision's development in the Midwest City Safe City project
Due to the limited financial capacity of the government in the central and western regions, the funds for the construction of large safe city projects have a one-time payment ability, and the possibility of using BT or BOT is higher. As of the third quarter of this year, Hikvision had 3.8 billion yuan in cash, which gave it an effective financial support for undertaking major projects in the future with BT and BOT. Moreover, it has a formal financial leasing license and can also leverage bank funds to undertake major projects. Therefore, Hikvision's advantage in terms of funding is unmatched by competitors. Hikvision's largest shareholder is 52, and the actual controller is China Electronics Technology Corporation. All along, it is a star enterprise under China Electronics Technology Group Corporation and is highly valued by the group. We believe that this gives the company an inherent advantage in marketing PR for major engineering projects. Take the safe city construction as an example. In October 2005, the Ministry of Public Security deployed the pilot project for the construction of the national urban alarm and monitoring system (ie the "3111" pilot project). It is expected that the second batch of pilot cities will end by 2010, "3111 workers
Cheng directly invested 10 billion yuan. After 2010, the "3111 project" entered the overall promotion stage and was promoted to each prefecture-level city. The total direct investment was nearly 100 billion yuan. Shaanxi Province made a clear investment of 500 million yuan in the next five years in 2009. Five-channel alarm monitoring and defense line, Chongqing will implement monitoring of all communities by 2012, and code-monitoring of 790,000 urban components. In 2009 and the next three years, Xining City will build an integrated video surveillance platform to realize the construction of 4000 monitoring points. All of the project's common points are driven by the government, so the marketing ability of the government departments is the core element of undertaking these projects.The actual controller of Hikvision is the sub-ministerial unit directly subordinated to SASAC and is undertaking these projects. At that time, there were many communication channels and communication methods with the competent officials of local governments, and the efficiency and effectiveness of their marketing were also unmatched by ordinary private enterprises.In summary, Hikvision's ability to compete with large-scale marketing capabilities We have opened up a big gap for hand-raising, and we are optimistic about its progress in the development of the Safe City project in the Midwest.
2. Intelligent traffic construction is expected to enter a substantive stage
Hikvision and Dahua have been actively preparing for the construction of intelligent transportation in the past two years (for example, Haikang has acquired Shanghai Goldway, which specializes in intelligent transportation). We expect that they should all be negotiating related intelligent transportation projects. As mentioned above, the intelligent transportation project may become a continuous operation project, and the income from the one-time sale of equipment may be extended to continuous operating income. Once they have made breakthroughs in the intelligent transportation project, from the perspective of revenue growth, the UOB shares will be larger (because their current volume is still smaller); in the sense of upgrading the business model, Say it will play a role in improving valuations.
3, optimistic about the future performance of related companies exceeds expectations and valuation increases
We believe that the progress of the safe city and intelligent transportation projects that cannot be accurately predicted at present will bring the performance of related video security companies headed by Hikvision and Dahua to exceed expectations; and the business models brought about by the implementation of these projects. Upgrades will increase their valuation.
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