Investment Rating - The report maintains a BUY rating for Kingdee with a target price of HK$15.50, reflecting a potential upside of 66.3% from the current price of HK$9.32 [4]. Core Insights - Kingdee reported a revenue of RMB5.7 billion for 2023, representing a 17% year-over-year growth, and a net loss of RMB210 million, which is a significant reduction from a loss of RMB389 million in 2022 [2][12]. - The company is well-positioned to benefit from the domestic substitution trend, supported by strong product capabilities and an enhanced partner ecosystem [2]. - The cloud segment contributed 79% of total revenue, with cloud revenue growing 21% year-over-year to RMB4.5 billion [2]. Financial Performance - Revenue growth is projected to continue with a compound annual growth rate (CAGR) of 15-20% from 2023 to 2026 [2]. - The annual recurring revenue (ARR) grew by 34% year-over-year, indicating a solid SaaS growth outlook for 2024 [2]. - Kingdee's core SaaS product, Galaxy, achieved revenue of RMB2.0 billion, up 16.3% year-over-year, with a stable dollar retention rate of 97.2% [2]. Business Segments - The Galaxy product line recorded over 39,000 customers by the end of 2023, with a net addition of over 8,000 customers year-over-year [2]. - The Cosmic & Constellation (C&C) segment saw a revenue increase of 40.9% year-over-year, and management expects revenue growth to reaccelerate in 2024 due to strong project pipelines [2]. Financial Guidance - Management has guided for a subscription ARR CAGR of 30% from 2023 to 2026 and aims for at least RMB900 million in operating cash flow in 2024, indicating a growth of at least 38% year-over-year [2].
Steady rev growth with on-track loss reduction