(Yicai Global) April 27 -- Chinese electronic security firm Hangzhou Hikvision Digital Technology plans to spin off its Internet of Things unit on the Shanghai Star Market after group profit growth slowed last year due to China-US trade tension.

Hikvision will spin off Ezviz Network into an independent innovative business, it said in its latest financial report published April 25. Investors responded positively to the news, with Hikvision’s share price [SHE:002415] closing 4.5 percent higher at CNY31.08 (USD4.39).

The company made CNY12.4 billion (USD1.8 billion) in net profit last year, up 9.4 percent -- less than half the 20.6 percent gain it landed in 2018, according to the report. Hampered by the Covid-19 pandemic, first-quarter profit fell 2.6 percent annually to CNY1.5 billion, marking the firm’s second consecutive January-March loss after last year logging its first since listing in 2010.

The slowing profit last year was mostly because the US Department of Commerce placed the company on its Entity List, meaning American companies needed a license to trade with the firm, one analyst told Yicai Global. He believes using artificial intelligence and the Internet of Things will be a major trend for the security business.

Hikvision set up Ezvis in 2015 and by 2017 it was making CNY1 billion in operating income and had secured its first annual profit. It mostly makes video equipment, electronic access control systems and smart switches.

Spinning off the unit will broaden Ezvis’s access to finance and provide support for its ongoing research and development, Hikvision said, though noting that it was still only in the preliminary stages of conducting the spin off and had no specific plans yet as to how it would finalize the move.

Editor: Dou Shicong, James Boynton