Whether the investigation of directors of Hikvision disrupts the God trading of CITIC Securities

 Whether the investigation of directors of Hikvision disrupts the God trading of CITIC Securities

Directors under investigation

According to the evening announcement on November 13, Hu Yangzhong and Gong Hongjia, directors of Hikvision, received the notice of investigation from China Securities Regulatory Commission on November 11, 2019. Hu Yangzhong and Gong Hongjia were put on file for investigation on suspicion of illegal information disclosure. Hu Yangzhong, Gong Hongjia and the company (if necessary) will actively cooperate with the CSRCs investigation. According to the investigation progress, the company will perform information disclosure obligations in strict accordance with regulatory requirements.

According to the third quarter report, Gong Hongjia holds 13.43% of Hikvision, which is the second largest shareholder of Hikvision. As of the third quarter report, Hu Yangzhong is the second natural person shareholder of the company, with an individual holding 182 million shares, accounting for 1.95%.

Gong Hongjia, born in 1965, Hong Kong permanent resident, Bachelor of engineering, technology entrepreneur and angel investor. It has successively established and invested more than ten enterprises including Desheng company, Yaxin Dekang, Funian technology, grip data, etc.; in November 2001, it participated in the establishment of Hikvision, and now it is the vice chairman of Hikvision. Hu Yangzhong, born in 1965, master of engineering, researcher level senior engineer. From June 1989 to December 2001, he served as an engineer of 52 Institute; since December 2001, he is now the director and general manager of Hikvision.

In response to media concerns, Huang Fanghong, Secretary of the board of directors of Hikvision, said that the CSRC is still in the process of investigation and the specific situation needs further understanding. The current information is only for reference and may not be complete and accurate. Gong Hongjia gave some incentives to employees because of the companys good performance, but didnt disclose it to the market. It is not for the company, but for the investigation of directors, specific results and other CSRC.

Previously, on October 25, Hikvision announced that the board of directors had received written resignation reports from three senior executives of the company, Jiang Haiqing, Jia Yonghua and Li pan, all of whom resigned from the position of senior deputy general manager of Hikvision, but remained in their company.

Among them, Jiang Haiqing applied for resigning from the position of senior deputy general manager of the company due to the adjustment of business management of the company, and continued to be the legal representative, executive director and general manager of Hangzhou fluorite Network Co., Ltd. and its subsidiaries; Jia Yonghua applied for resigning from the position of senior deputy general manager of the company, and continued to be the legal representative, executive director and general manager of Hangzhou Haikang Robot Technology Co., Ltd. and its subsidiaries Representative, executive director and general manager; Li pan applied to resign from the position of senior deputy general manager of the company, and continued to be the legal representative, executive director and general manager of Hangzhou Haikang Automobile Technology Co., Ltd. and its subsidiaries.

The resignations of the three senior managers are based on the needs of the companys business management adjustments and are expected to play a significant role in their respective businesses, said Hikvision

God operation of CITIC Securities

In early trading on May 22, influenced by the news that a supplier of a certain country cut off supply, the companys stock price was close to the limit at the beginning of trading, and fell below 24 yuan on June 6. During the downturn, CITIC Securities increased its holdings of 19302900 shares in the second quarter and 9732000 shares in the third quarter.

Although the cut-off storm once caused the stock price to plummet, and now the companys directors are investigated by the CSRC, CITIC Securities, the securities firm first brother, has never abandoned its position in Hikvision. In the second and third quarters of this year, it increased its position by a large margin. In the fourth quarter of 2018, when the stock price was at its lowest, CITIC Securities increased its position by 24.3155 million shares of Hikvision and copied the bottom for many times The timing of the increase can be called God operation.

On the evening of October 18, Hikvision released the third quarter report. The operating revenue of the first three quarters was 39.839 billion yuan, an increase of 17.86% year on year; the net profit was 8.027 billion yuan, an increase of 8.54% year on year. At the beginning of this year, the companys first quarter net profit increased by - 15.41% year-on-year due to its stable growth, which attracted the attention of the outside world due to the decline in performance. However, in the second quarter of this year, the industry saw the recovery momentum of the company. In the second quarter, the net profit attributable to the parent company increased by 14.98% year on year. From the perspective of the third quarter report, the companys performance recovery momentum was further established. Data shows that in the third quarter, the net profit attributable to the parent of Hikvision was 3.81 billion yuan, up 17.31% year on year.

However, the net cash flow from operating activities in the first three quarters fell by 95.3% to RMB 124 million year-on-year, which was interpreted by Hikvision as the increase of stock in the current period, and the inventory on September 30 increased by 71.96% to RMB 9844 million year-on-year. In addition, R & D expenses increased by 30.2% to 4.007 billion yuan year on year.

In an exchange with investors on October 19, the management of Hikvision said: the company also continues to carry out material substitution work to ensure a more stable preliminary plan for product supply. The company has a stable business situation, and can provide high-quality products and services for customers at home and abroad for a long time. For the full year of 2019, we expect the annual net profit growth range to be 5-20%.

In the prospectus of medium-term notes issued on October 21, Hikvision said: considering the policy uncertainty of suppliers, the issuer prepared a lot of goods, and the inventory balance at the end of June 2019 has far exceeded that of last year. Among them, the inventory of goods and raw materials accounts for a large proportion, and the possibility of adverse changes in the future market, the issuer has a certain risk of inventory unsalable in the future.

Xie Heng, an analyst at Societe Generale Securities, said that the inventory at the end of the third quarter was 9.845 billion, an increase of 4.047 billion compared with the same period last year, and an increase of 1.234 billion compared with the end of the second quarter. It was mainly the preparation of key components and spare more time for the replacement of components and schemes. Due to the payment of more cash, the current operating cash flow was affected, but the fourth quarter was the peak of payment collection, and it is expected to improve.

In the prospectus for the first phase of 2019 medium-term notes issued on October 21, Hikvision said, the raised fund of medium-term notes is 5 billion yuan, which is intended to supplement the working capital of the issuer and its subsidiaries and repay the matured debts of the issuer. The issuers current business activities include raw material procurement, scientific and technological research and development, construction of science and Technology Park, construction of security engineering, etc., which need to occupy a large amount of capital, with large cost expenditure. The expansion capacity of the issuers business scale is closely related to the companys capital turnover. At the same time, the issuers domestic and foreign project investment is increasing, so the demand for working capital is further improved.

Source: First Financial Editor: Guo Chenqi, nbj9931