Major deal finalized: Equity in this smart home company sold

Meanwhile, another shareholder of Huacheng Network, Ningbo Huayu Investment Management Partnership (Limited Partnership), also plans to transfer its 18.1969% equity stake to Shanghai Zhicheng for RMB 399 million. The total amount of the two transactions reaches 1.116 billion yuan, marking Dahua Shares' complete exit from its holding in the subsidiary Huacheng Network, and Huacheng Network and its subsidiaries will no longer be included in Dahua Shares' consolidated financial statements.

Huacheng Network was established in 2015 and is a smart home brand targeting the consumer end of the global civil smart IoT market. Its core brand "Lechange" covers a wide range of smart home products such as smart cameras, smart door locks, and home service robots, building four major product systems: "Lechange Security, Lechange Interconnection, Lechange Robots, and Lechange Lighting."

依托于乐橙的AI能力和云平台支撑，消费者能够得到全场景的家居智能解决方案。目前，乐橙品牌的用户规模已超过4500万，产品覆盖全球超过100个国家。

华橙网络的盈利能力在大华股份体系内相对较强。2023年度，华橙网络实现营收19.76亿元，净利润为1.162亿元；2024年前三季度，该企业营收16.58亿元，净利润1.156亿元。

大华股份作为全球领先的以视频为核心的智慧物联解决方案提供商和运营服务商，主要产品及服务包括视频感知产品、融合感知产品、音频感知产品、智能交互产品等。

However, in recent years, Dahua Technology's performance has faced significant challenges. In 2024, the company expects to achieve net profit attributable to shareholders of RMB 2.8 billion to RMB 3.08 billion, a year-on-year decrease of 61.97% to 58.16%, indicating a clear downward trend in performance.

The sale of Huacheng Network's equity is expected to bring approximately RMB 530 million in gains to Dahua Technology, which is undoubtedly a major benefit for alleviating its performance pressure. However, from a long-term development perspective, this transaction also marks a gap in Dahua Technology's layout in the smart living sector.

According to the announcement, Dahua Technology has committed that, within three years from the date of equity transfer of Huacheng Network, the company and its subsidiaries will not engage in consumer-oriented smart home businesses currently operated by Huacheng Network, such as home security cameras and smart door locks, through operating or investing in entities or brands.

Behind this strategic adjustment is Dahua Technology's response to setbacks in its traditional business. In recent years, the growth rate of the security industry has slowed down, market demand has tended towards saturation, and the shrinkage of government orders has further exacerbated this trend.

In 2022, both Hikvision's PBG (Public Business Group), represented by government customers, and Dahua's ToG (Government Business) experienced declines. In the first half of 2024, the revenue from these two businesses for Hikvision and Dahua Technology were RMB 5.693 billion and RMB 1.768 billion respectively, representing Year-on-year (YoY) declines of 9.25% and 15.07% respectively.

Shanghai Zhicheng, the acquirer of Huacheng Network, is backed by Liu Xiaodan, known as the "M&A Queen" in the investment banking sector, and her Chen Yi Fund. With assets under management exceeding RMB 10 billion, Chen Yi Fund focuses on M&A investments, with portfolio companies including BYD Semiconductor, Hualan Vaccine, and others. Liu Xiaodan brings extensive experience and deep resource accumulation in the M&A field, having led her team at Huatai United Securities to create numerous classic cases in mergers, acquisitions, and restructuring.