From Hikvision's plan to spin off EZVIZ and list it on the market, we can see the development of the domestic smart home market

Nearly six years after its establishment, EZVIZ is now starting to "start its own business and become self-reliant", but after breaking away from the "Hikvision" brand effect, how far can EZVIZ go?

Planned to spin off and list on the Science and Technology Innovation Board

The cause of the incident started with an announcement.

On January 9, Hikvision released a "Plan for the Spin-off of its Subsidiary Hangzhou EZVIZ Network Co., Ltd. to the Science and Technology Innovation Board", proposing to transform its holding subsidiary Hangzhou EZVIZ Network Co., Ltd. (hereinafter referred to as "EZVIZ") into a joint-stock company and then spin it off to the Science and Technology Innovation Board. After the spin-off is completed, Hikvision's equity structure will not change, and it will still maintain its controlling stake in EZVIZ.

Hikvision stated that through this spin-off, EZVIZ Network will be independently listed as the listing platform for the company's smart home and cloud platform service businesses. Through the listing on the Science and Technology Innovation Board, it will increase its investment in core technologies for smart home comprehensive solutions and cloud platform service businesses, realize the expansion and strengthening of its smart home business, and continue to provide intelligent products and high-quality services to users in individuals, families and home-like scenarios.

Hikvision will further focus on providing video-centric intelligent IoT solutions and big data services to users in the public service sector, corporate users, and small and medium-sized enterprises, so as to better build smart cities and digital enterprises that integrate cloud and edge, physical and information, and digital and intelligence.

In short, Hikvision will focus on To B and To G businesses, while To C business will be completely separated and handed over to EZVIZ to independently operate the service.

As of the announcement date of this plan, Hikvision holds 60% of the equity of EZVIZ and is the controlling shareholder of EZVIZ. CEC Group, through its wholly-owned subsidiaries CEC HIKVISION, CEC Investment and its subordinate research institute CEC 52 Institute, holds a total of 40.89% of Hikvision's shares and is its actual controller, as well as the actual controller of EZVIZ.

Hikvision announced the distribution of EZVIZ Network’s equity

However, Tianyancha data shows that Hangzhou Qianmo Qinghe Equity Investment Partnership (Limited Partnership) is currently the major shareholder of EZVIZ, with a subscribed capital of RMB 99 million, accounting for 99%, while Hikvision has subscribed a capital of RMB 1 million, accounting for only 1%. This is far from what Hikvision disclosed.

Further investigation revealed that Hangzhou Qianmo Qinghe Equity Investment Partnership (Limited Partnership) was established on October 30, 2020. It mainly engages in equity investment, but its registered capital, shareholders' contribution ratios, etc. are all blank. The ultimate beneficiary is "Hangzhou Qianmo Hebin Equity Investment Co., Ltd."

Hangzhou Qianmo Hebin Equity Investment Co., Ltd. was established on October 12, 2020 with a registered capital of 5 million yuan. The major shareholder Gao Zhenlong invested 3.5 million yuan, accounting for 70%; Jin Yamin invested 1.5 million yuan, accounting for 30%. However, there is no trace of "Haikang" in Gao Zhenlong's name, and the same is true for Jin Yamin, which is quite puzzling.

Judging from the equity distribution alone, EZVIZ is no longer a wholly-owned subsidiary of Hikvision; but according to the announcement, after the spin-off is completed, EZVIZ will still be a wholly-owned subsidiary of Hikvision, and its financial status and profitability will still be reflected in Hikvision's consolidated financial statements.

Industry insiders said that this may be the first step for EZVIZ to de-Hikvision, but the future market development of EZVIZ will still rely on Hikvision's years of channel accumulation.

After introducing the whole story, let’s talk about EZVIZ Network.

Founded nearly 6 years ago, revenue exceeds 2 billion yuan

Public information shows that EZVIZ Network was established on March 25, 2015 with a registered capital of 100 million yuan. In fact, as early as 2013, Hikvision launched the Internet video business under the EZVIZ brand, mainly providing Internet video applications and services for small and micro enterprises, families and individual customers through intelligent video products and other sensors, cloud intelligent video service platforms and mobile application software.

At that time, it launched the EZVIZ cloud service platform, and used this platform to support the development of the network ecological environment; established the e-commerce platform "EZVIZ Mall"; and released a series of newly designed Internet cameras, cross-border video boxes, alarm boxes and other consumer products.

In 2014, the Internet video business of the EZVIZ brand continued to improve and strengthen in terms of products, cloud platforms and content services. It launched products such as C2S, F1 and S1 to meet the different needs of small and medium-sized enterprises, families and individuals, and further strengthened the construction of the EZVIZ cloud video platform and launched cloud storage services.

At the same time, Hikvision also cooperated with Internet companies and large operators such as BAT, JD.com and LeTV to develop platform interconnection and establish a win-win ecosystem to accelerate the layout of Internet business. In 2014, the number of users of EZVIZ APP was close to one million.

On March 25, 2015, EZVIZ Networks was formally established, primarily responsible for the Internet video business of Hikvision's EZVIZ brand. By the end of 2016, the EZVIZ cloud platform already had tens of millions of users, and had developed more than one thousand EZVIZ O2O stores in more than 500 cities across the country, with good market results.

In 2017, EZVIZ Network mainly served the smart home and smart business sectors. After five years of development, it also became the first innovative business to achieve profitability. In 2017, it achieved operating income of 1.026 billion yuan and net profit of 37.0307 million yuan. In the same year, the number of devices connected to EZVIZ Cloud reached 28 million, and the number of EZVIZ Cloud APP users exceeded 20 million.

In 2018, EZVIZ evolved from single smart products and packages to a whole-house smart system, and launched new products such as the fully wireless video intercom battery doorbell camera DB2, the Internet fingerprint password lock LT21S, the smart wall switch P1 for whole-house smart control, the smart curtain machine MC1, and the child care robot - Yingbao. It also extended the IPC product line and smart home product lines such as smart locks, smart cat eyes, and smart video doorbells, forming a whole-house smart home system with video technology as the core.

EZVIZ Cloud has become a global video cloud service platform with 40 million connected devices and 30 million users, providing stable and continuous comprehensive video-based services to users around the world.

In 2018, EZVIZ achieved operating revenue of 1.515 billion yuan and net profit of 119 million yuan, with revenue increasing by approximately 48% and net profit increasing by approximately 222% year-on-year.

In the following two years, EZVIZ achieved substantial growth in both revenue and net profit. In 2019 and January-September 2020, it achieved operating revenue of 2.426 billion yuan and 2.049 billion yuan, respectively, and net profit of 260 million yuan and 273 million yuan, respectively. The growth of net profit from January to September 2020 was still higher than the trend of operating income.

At present, EZVIZ Network is positioned as a provider of smart home products and cloud platform services, forming a dual-core business structure of "smart home + cloud platform services". Its vision is to build an ecosystem for smart homes and create a safe, comfortable and pleasant living and working environment for users.

In terms of products, it has formed a "1+4+N" product and business system. Among them, 1 represents cloud platform services, 4 represents major smart home products such as smart home cameras, smart home entry, smart control and smart service robots, and N represents other smart home products in the ecosystem, including smart fresh air, smart water purification, smart bracelets, children's watches, etc.

The EZVIZ cloud platform has evolved into an IoT cloud platform, focusing on PaaS-layer cloud platform services in the field of IoT. As of the end of September 2020, there were approximately 95 million IoT-connected devices on the EZVIZ IoT cloud platform worldwide, with more than 67 million registered users, more than 26 million monthly active users, and more than 11 million daily active users.

Is the smart home market entering a period of rapid growth?

It has to be said that from its initial trial in 2013 to today's EZVIZ, Hikvision's innovative smart home business layout has achieved a phased victory. Whether in terms of revenue or product market development, it has already surpassed a number of domestic security companies that have entered the smart home market.

Since the current disclosure is only a preliminary plan, we cannot know more details about the development of EZVIZ Network, whether its smart home products are the main source of revenue, or whether the EZVIZ cloud platform has considerable revenue-generating capabilities. All of these require waiting for the company's official IPO announcement to be disclosed.

If we only look at the smart home market, compared with other domestic security companies that have deployed smart home businesses, EZVIZ's current revenue scale is already dozens of times that of other companies.

Take Wanjiaan as an example. According to its 2020 prospectus, the revenue of its smart home IoT business in 2017, 2018 and 2019 was RMB 14.1385 million, RMB 10.078 million and RMB 73.2955 million respectively. Although Wanjiaan's market size is not comparable to that of Hikvision, it is still of reference significance. (It has jointly created a smart home IoT brand with Tencent Cloud)