Investment Rating - The report maintains a "Hold" rating for Kingdee International (268 HK) with a target price of HK$14.94, indicating a potential downside of 1% from the current price of HK$15.14 [1][8]. Core Views - The report highlights that Kingdee's stock price has increased by 94% year-to-date, outperforming the Hang Seng Index, which rose by 23%. However, the company's fundamental recovery is lagging behind this valuation increase [6]. - For the second half of 2024, Kingdee's revenue grew by 9% year-on-year to RMB 3.39 billion, which was below market expectations. The annual recurring revenue (ARR) increased by 20% to RMB 3.43 billion, also falling short of expectations [6][10]. - The report notes that Kingdee's cloud service revenue grew by 10% year-on-year to RMB 2.72 billion, again below market consensus [6][10]. - The management expects ARR to grow by approximately 20% in 2025, with revenue growth anticipated to accelerate to 14% year-on-year [6][10]. Summary by Sections Investment Rating and Price Target - The target price has been raised from HK$6.38 to HK$14.94, reflecting a significant increase of 134% [2][12]. - The current valuation is aligned with global peers, with a projected P/S ratio of 7.0, up from 2.8 [8][12]. Financial Performance - For 2025, the expected revenue is RMB 7.15 billion, with a year-on-year growth of 14% [9][10]. - The report projects a net profit of RMB 176 million for 2025, with an EPS of RMB 0.05 [9][10]. - The operating profit is expected to reach RMB 75 million in 2025, indicating a return to profitability [9][10]. Adjustments and Forecasts - Due to underperformance in the second half of 2024, revenue forecasts for 2025 and 2026 have been adjusted downwards by 3% and 5%, respectively [7][10]. - The ARR forecast for 2025 has been revised to a growth of 22%, down from previous estimates [7][10]. Market Comparison - Kingdee's market capitalization is approximately US$6.99 billion, with a three-month average daily trading volume of US$89 million [1][12]. - The report compares Kingdee's performance with global peers like SAP and Workday, noting that Kingdee's revenue growth and AI monetization capabilities are still developing [8][12].

2025 年 3 月 20 日 软件及服务: 超配 授权转发报告/ 业绩点评报告 金蝶国际 (268 HK, 持有, 目标价: HK$14.94) | 目标价: HK$14.94 | 当前股价: HK$15.14 | | --- | --- | | 股价上行/下行空间 | -1% | | 52 周最高/最低价 (HK$) | 17.76/5.26 | | 市值 (US$mn) | 6,987 | | 当前发行数量(百万股) | 3,586 | | 三个月平均日交易額 | 89 | | (US$mn) | | | 流通盘占比 (%) | 68 | | 主要股东 (%) | | | 徐少春 | 19 | | 按 2025 年 3 月 17 日收市数据 | | | 资料来源: FactSet | | 主要调整 | | 现值 | 原值 | 变动 | | --- | --- | --- | --- | | 评级 | 持有 | 持有 | N/A | | 目标价 (HK$) | 14.94 | 6.38 | 134% | | 2025E EPS (RMB) | 0.05 | 0.12 | -61% | | 2026E EP ...

Group 1 - The core viewpoint of the report indicates that Kingdee International's 2024 performance slightly underperformed expectations, with a revenue growth of 10.2% year-on-year and a net loss of 142 million yuan, although the loss has narrowed [1] Group 2 - According to CICC, Kingdee's subscription transformation continues to deepen, and AI is enabling the release of business value [2] - The operating loss for 2024 is expected to narrow to 335 million yuan, with a forecast of achieving breakeven in net profit by 2025 [2] - Considering macroeconomic impacts, CICC has lowered Kingdee's 2025 revenue forecast to 7.1 billion yuan and introduced revenue, net profit, and operating cash flow forecasts for 2026 [2] - CICC maintains an "outperforming the industry" rating and raises the target price to 17 HKD [2]

Group 1 - The core point of the article is that Dong Mingzhu, a non-executive director of Kingdee International (00268.HK), reduced his holdings by 100,000 shares at an average price of HKD 15.35 per share, totaling HKD 1.535 million [1] - After the reduction, Dong Mingzhu holds 300,000 shares, representing 0.01% of the total shares [1] - Morgan Stanley downgraded Kingdee International's rating to "Equal-weight" with a target price of HKD 13.50 [1]

Investment Rating - The report maintains a "Strong Buy" investment rating for the company [2][6][7] Core Insights - The company's revenue and cost dynamics show improvement, with a significant reduction in losses and a substantial increase in operating cash flow, indicating ongoing operational improvement [6][7] - AI has become a core strategic focus for the company, with a full range of AI products launched across all product lines, and a strong customer demand expected to translate into performance [6][7] Financial Performance - In 2024, the company achieved a total revenue of 6.256 billion yuan, a year-on-year increase of 10.2%, and a net loss of 142 million yuan, down from a loss of 210 million yuan in the previous year [6][8] - Operating cash flow reached 934 million yuan, a 42.9% increase year-on-year, with cloud service revenue accounting for 81.6% of total revenue [6][8] - The gross margin improved to 65%, with a notable increase in productivity and a reduction in operating expenses [6][8] Growth Drivers - Large enterprises continue to be the growth engine, with significant contract growth and a renewal rate of 108%, indicating strong ongoing demand [6][7] - The company has embraced AI in its management solutions, integrating AI across various applications, which is expected to enhance operational efficiency for clients [6][7] Future Projections - Revenue projections for 2025-2027 are estimated at 7.326 billion, 8.700 billion, and 10.241 billion yuan, respectively, with expected growth rates of 17%, 19%, and 18% [7][8] - The company anticipates a return to profitability with net profits projected at 165 million, 247 million, and 412 million yuan for the same period [7][8]

Summary of Kingdee International's Conference Call Company Overview - **Company**: Kingdee International Software Group Co., Ltd. - **Fiscal Year**: 2024 - **Total Revenue**: RMB 3.93 billion, with cloud service revenue accounting for 81.6%, a year-on-year increase of 13.4% [2][3][4] - **Net Loss**: Reduced by 32.3% to RMB 142 million [2][3] - **Operating Cash Flow**: Increased by 42.9% to RMB 934 million [2][3] - **Cash Reserves**: RMB 4.65 billion at year-end, indicating a healthy financial position [2][3] Key Financial Metrics - **Profit Margin**: Increased from 3% in 2023 to 6% in 2024 [2][5] - **Research and Development (R&D) Investment**: Stable with a slight increase of 0.4% [2][6] - **Administrative Expenses**: Increased by 9.9% due to personnel restructuring [2][5] Cloud Service Performance - **Cloud Service Revenue Growth**: 13.4% increase, contributing to 81.6% of total revenue [2][4] - **Annual Recurring Revenue (ARR)**: Grew by 20% to RMB 3.43 billion, with a 5.4 times increase since 2020 [2][4] - **Contract Liabilities**: High levels indicating potential future revenue [4] Large Enterprise Market - **Contract Growth**: Number of contracts over RMB 10 million doubled, totaling RMB 2.1 billion [2][7] - **New Customers**: 652 new large enterprise customers [2][7] - **ARR Growth for Large Clients**: Increased by 30% [2][7] - **Net Renewal Rate**: Improved to 108% [2][7] AI Integration and Innovations - **AI Applications**: Significant improvements in client management and operational efficiency, e.g., a 70% reduction in workload for China Merchants [2][8] - **AI Product Launches**: Introduction of EBC digital employee solutions and the Cangqiong GPT platform [2][11] - **Future AI Spending**: Expected global IT spending on AI to reach USD 500 billion by 2027 [2][10] Strategic Direction - **AI Development Goals**: Aim to become a leading enterprise management AI company by 2030 [2][10] - **Internal AI Utilization**: Initiatives to enhance efficiency and reduce costs through AI [2][20] - **Market Positioning**: Focus on becoming a benchmark for AI usage within the software industry [2][20] Challenges and Outlook - **Market Sensitivity**: The small and medium enterprise market is sensitive to economic conditions, impacting growth [2][19] - **Future Growth Expectations**: Anticipated improvement in performance due to increased demand for digital transformation among SMEs [2][19] - **Profitability Outlook**: Continued profitability expected, with a conservative approach to future guidance [2][21] Conclusion - **Investment Potential**: Kingdee International is positioned as a valuable player in the enterprise management AI sector, with a focus on sustainable growth and innovation in cloud services and AI applications [2][29]

Revenue Growth - Revenue for the year ended December 31, 2024, increased by approximately 10.2% to RMB 6,255,684,000, compared to RMB 5,679,073,000 in 2023[2] - Cloud service revenue grew by approximately 13.4% year-on-year, accounting for 81.6% of total revenue, up from 79.3% in 2023[4] - Annual Recurring Revenue (ARR) for cloud subscription services reached approximately RMB 3.43 billion, representing a year-on-year growth of 20.0%[4] - The company signed contracts worth approximately RMB 2.1 billion, with a year-on-year growth of 51.9%[12] - For the fiscal year ending December 31, 2024, the total revenue from external customers in China was RMB 6,185,824,000, an increase from RMB 5,636,312,000 in 2023, representing a growth of approximately 9.7%[46] - The cloud services business generated revenue of RMB 5,106,725,000 for the fiscal year 2024, up from RMB 4,504,983,000 in 2023, reflecting a growth of about 13.3%[42][44] - The total group revenue for 2024 was RMB 6,255,684,000, compared to RMB 5,679,073,000 in 2023, marking an increase of around 10.1%[42][44] Profitability and Losses - Loss attributable to equity holders narrowed to approximately RMB 142,068,000, down from RMB 209,890,000 in 2023[2] - The total comprehensive income for the year ended December 31, 2024, was RMB 23,206 thousand, a significant improvement from a loss of RMB 202,725 thousand in 2023[26] - The annual loss for 2024 was RMB 184,339 thousand, compared to a loss of RMB 269,806 thousand in 2023, indicating a reduction in losses by approximately 31.7%[26] - The group reported a loss attributable to equity holders of approximately RMB 142,068,000 for the year ended December 31, 2024, compared to a loss of RMB 209,890,000 in the same period of 2023, resulting in a net loss margin of about 2.3%[125] - Basic loss per share for 2024 was RMB 4.01, compared to RMB 6.07 in 2023, indicating a reduction in loss per share[106] Cash Flow and Financial Position - Net cash inflow from operating activities was approximately RMB 933,530,000, compared to RMB 653,319,000 in 2023[4] - Operating cash flow for the year ended December 31, 2024, was RMB 951,584 thousand, an increase of 41% from RMB 675,222 thousand in 2023[32] - Cash used in investing activities totaled RMB 1,073,932 thousand, a decrease of 17% from RMB 1,304,553 thousand in 2023[32] - Cash flow from financing activities resulted in a net cash outflow of RMB 1,291,276 thousand, compared to a net inflow of RMB 1,670,991 thousand in 2023[32] - The company's cash and cash equivalents decreased by RMB 1,431,678 thousand, ending the year at RMB 1,529,682 thousand, down from RMB 2,963,723 thousand at the beginning of the year[32] - The total cash and bank deposits recorded by the group were RMB 4,175,154,000 as of December 31, 2024, down from RMB 5,692,651,000 in 2023[134] Investment and Assets - The investment business reported a significant loss of approximately RMB 48.53 million, an increase of 1851% year-on-year, primarily due to fair value losses on investment properties[18] - The total assets decreased from RMB 14.139 billion to RMB 13.781 billion, while total liabilities increased from RMB 5.437 billion to RMB 5.652 billion[20][22] - The fair value of investment properties as of December 31, 2024, is RMB 2,164,691,000, up from RMB 1,726,750,000 in 2023, reflecting a growth of 25.4%[65] - The total net book value of property, plant, and equipment as of February 28, 2024, is RMB 1,919,498,000, an increase from RMB 1,376,694,000 as of February 28, 2023, representing a growth of approximately 39.4%[57] Research and Development - Research and development costs for 2024 amounted to RMB 1,514,433 thousand, an increase of 5.2% from RMB 1,439,671 thousand in 2023[13] - The company plans to fully transform into an enterprise management AI company by 2025, leveraging its powerful AI platform to enhance productivity for global customers[149] Strategic Focus and Market Presence - The company aims to deepen its global market presence, focusing on opportunities for Chinese enterprises going abroad[9] - The strategic focus includes "AI-first, subscription-first, and globalization" to drive digital transformation and international development[5] - Kingdee expanded its strategic ecosystem by deepening collaborations with major AI model providers and state-owned enterprises, resulting in over 200 digital products and 19 joint industry solutions[16] Shareholder Actions and Governance - The company did not recommend any dividend for the year ending December 31, 2024, consistent with the previous year[104] - The board of directors has not complied with the corporate governance code regarding the separation of the roles of chairman and CEO[160] - The audit committee consists of two independent non-executive directors and one non-executive director, ensuring oversight of financial reporting and risk management[163] - PwC has been appointed as the external auditor for the year 2024, with no changes in auditors over the past three years[164] Employee and Social Responsibility - The group has a total of 12,149 employees, focusing on customer-centric and professional innovation, while providing various training programs to enhance skills and leadership[146] - The company engaged in various public welfare activities, including poverty alleviation education and environmental initiatives[148] - The company organized blood donation events and environmental walks in multiple cities to promote social responsibility[148]

Investment Rating - The investment rating for the company is "Buy" [1] Core Views - The company is undergoing a significant cloud transformation, which is expected to drive revenue growth and lead to a gradual narrowing of losses, with a forecast to achieve breakeven by 2025 [3][6] - The integration of AI capabilities into ERP systems is a key focus, with the launch of the DeepSeek model enhancing the company's SaaS applications [4][45] - The company has a strong competitive advantage in the SME market, with high renewal rates and significant growth in large enterprise cloud revenue [5][6] Summary by Sections 1. Cloud Transformation and Revenue Growth - The company has transitioned from traditional ERP to cloud services, with revenue increasing from 1.586 billion in 2015 to 5.679 billion in 2023, reflecting a CAGR of 17.29% [3][24] - Losses peaked at 360 million in 2020 due to increased R&D and the cessation of certain ERP product sales, but narrowed to 143 million in 2023, with expectations of breakeven by 2025 [3][25] 2. AI Integration in ERP - The company has been implementing AI strategies since 2017, with significant advancements in financial and HR management through partnerships and the development of large-scale AI models [4][46] - The launch of the "Cang Qiong GPT" model in 2023 represents a major step in enhancing the company's AI capabilities within its ERP offerings [4][46] 3. Competitive Positioning - The company has demonstrated a strong competitive edge in the SME market, achieving a cloud revenue of 1.642 billion in the first half of 2024, with renewal rates of 95% for SMEs and 92% for small enterprises [5][6] - In the large enterprise segment, cloud revenue reached 546 million in the first half of 2024, marking a year-on-year growth of 38.9% [5][6] 4. Financial Projections - Revenue projections for 2024, 2025, and 2026 are estimated at 6.484 billion, 7.561 billion, and 8.860 billion respectively, with net profits expected to turn positive by 2025 [6][10] - The company's subscription ARR reached 3.15 billion in the first half of 2024, indicating strong growth potential [5][38]

Investment Rating - The investment rating for the company is "Buy" [1] Core Views - The company is undergoing a significant cloud transformation, which is expected to drive revenue growth and lead to a gradual narrowing of losses, with a forecast to achieve breakeven by 2025 [3][6] - The integration of AI capabilities into ERP systems is positioned to enhance the company's competitive edge and facilitate intelligent transformation [4][5] Summary by Sections 1. Business Transformation and Growth - The company has transitioned from traditional ERP to cloud services, with revenue increasing from 1.586 billion yuan in 2015 to 5.679 billion yuan in 2023, reflecting a CAGR of 17.29% [3][24] - The cloud service revenue accounted for 83.25% of total revenue in the first half of 2024, indicating a rapid shift from traditional ERP services [26][29] - The company expects to narrow its losses to 0.78 billion yuan in 2024 and achieve a net profit of 1.97 billion yuan in 2025 [6][10] 2. AI Integration and Market Position - The company has integrated AI capabilities into its ERP offerings, launching the "DeepSeek" model to enhance its SaaS applications [4][45] - The AI-driven products are expected to optimize processes in financial and human resource management, improving efficiency and decision-making [45][46] - The ERP software market in China is projected to grow from 385 billion yuan in 2021 to 682 billion yuan by 2027, with a CAGR of approximately 11% [50] 3. Financial Performance and Projections - The company forecasts revenues of 6.484 billion yuan, 7.561 billion yuan, and 8.860 billion yuan for 2024, 2025, and 2026 respectively, with a return to profitability expected in 2025 [6][10] - The subscription ARR for cloud services reached 3.15 billion yuan in the first half of 2024, with a significant growth trajectory [38][40] - The company's gross margin is expected to recover as operational efficiencies improve, following a period of high R&D and sales expenses [34][36]

Key Points Summary of Kingdee International Conference Call Company Overview - **Company**: Kingdee International - **Industry**: Enterprise Resource Planning (ERP) and AI Applications Core Insights and Arguments - **AI Integration in ERP**: Kingdee has made significant advancements in AI applications within its ERP systems, with strong demand from downstream customers exceeding market expectations. A recent AI application launch event in Guangzhou attracted over 1,000 attendees, indicating a strong interest from business owners in integrating AI into ERP software for cost reduction and efficiency improvement [3][5]. - **Deepening AI Applications**: Starting in the second half of 2025, AI applications in ERP systems will transition from peripheral systems (like financial analysis and contract review) to core areas such as production and financial management, enhancing operational efficiency [3][4]. - **New AI Product Launches**: Kingdee has introduced eight new AI products, including an AI application platform, financial analysis tools, contract review, and HR recruitment process matching. These products aim to assist decision-making and optimize processes, thereby increasing Average Revenue Per User (ARPU) and user engagement [3][7]. - **General Models Empowering ERP**: Open-source general models like DeepSeek have lowered the barriers for AI applications, allowing Kingdee to conduct industry-specific training to bridge gaps in ERP systems and achieve more precise decision-making [3][10]. - **Industry-Specific Models**: Embedding industry-specific knowledge into vertical models is expected to address core business issues with higher precision, with training anticipated to be completed by the second half of 2025 [3][10]. - **Financial Resilience and Business Model Transformation**: Kingdee is projected to achieve a revenue growth of 10%-15% in 2025, with a recovery in operating cash flow and continuous growth in contract liabilities, indicating a significant transformation in its business model and potential for valuation recovery [3][12]. - **Valuation Recovery Potential**: Historical PS median and SAP's cloud transformation performance suggest that Kingdee's current valuation has substantial upside potential, driven by AI applications and fundamental turning points [3][14]. Additional Important Insights - **Market Response to AI Demand**: The market's response to AI integration in ERP systems has been robust, with significant interest from enterprises in optimizing business processes through advanced AI technologies [5]. - **Digitalization as a Precondition**: Digitalization is essential for advancing AI in ERP, as it enables effective data collection and utilization for intelligent decision-making and automation [6]. - **Challenges in Professional Applications**: While general models have leveled the playing field, their ability to support deep and widespread applications in specialized fields remains to be validated over time [8]. - **Future Growth Prospects**: Kingdee's future growth is promising, with a focus on AI applications expected to drive significant improvements in product value and market share, particularly in the context of domestic substitution [11][19]. - **Key Upcoming Events**: Two critical events in 2025 to monitor Kingdee's AI application progress include the May conference for new product features and the completion of training for the industry-specific model in June [21]. This summary encapsulates the key points from the conference call, highlighting Kingdee International's strategic focus on AI integration within ERP systems, its product innovations, and the anticipated financial performance and valuation recovery.