Company Overview - Kingdee International, founded in 1993 in Shenzhen, is a leading global provider of enterprise management cloud SaaS services, leveraging technologies such as cloud computing, big data, and AI to create digital solutions covering the entire lifecycle of enterprises, serving over 7.4 million businesses and government organizations globally across more than 20 industries [1][23] - The company ranks first in the Chinese market for SaaS EA, SaaS ERM, financial cloud, EPM, and PLM, and is the only enterprise management vendor in the top 10 of the generative AI model market in China, maintaining a leading market share in the growth enterprise application software sector for 20 consecutive years [1][23] Company Development Stages - The company's development has gone through four stages: 1. Financial software period (1993-2001): Established with the launch of Kingdee financial software in 1995 and the first internet-based ERP system in 1999 [2][24] 2. ERP period (2001-2011): Introduced BPM-based strategic management solutions and launched the EAS software for large enterprises [2][24] 3. Cloud service transformation period (2011-2023): Released Kingdee K/3 Cloud in 2012, marking a shift from traditional ERP models [2][24] 4. AI era (2023-present): Launched Cangqiong GPT in 2023 and plans to fully transform into an enterprise management AI company by 2025 [2][24] Shareholding Structure - The founder, Xu Shaochun, holds a total of 19.81% of the shares, making him the largest shareholder. The management team has extensive industry experience, with most members having over five years of tenure in the company [4][26] Main Business - Kingdee's main business includes enterprise-level cloud services and digital management solutions, forming a diverse product matrix that includes a cloud-native PaaS platform and layered SaaS management clouds [5][27] - The company’s flagship products include the Kingdee Cloud Cangqiong AI platform and SaaS management clouds such as Xinghan, Xingkong, and Xingchen, catering to different enterprise needs [5][27] Financial Performance - The company has seen significant growth in cloud service revenue, which accounted for 83.74% of total revenue in the first half of 2025, with cloud service revenue reaching 2.673 billion yuan, a year-on-year increase of 11.9% [6][28] - Total revenue for the first half of 2025 was 3.192 billion yuan, a year-on-year increase of 11.24%, with a net profit of -98 million yuan, reflecting a 55.14% year-on-year improvement [7][29] Profitability and Cost Management - The company’s gross margin and net margin have shown recovery, with a gross margin of 65.63% and a net margin of -3.42% in the first half of 2025, indicating improvements in profitability [10][31] - The company has also seen a decrease in expense ratios, with sales, management, and R&D expense ratios at 39.59%, 10.84%, and 24.4% respectively [11][31] Cloud Transformation Impact - The shift to a SaaS subscription model has enhanced customer retention and revenue stability, with renewal rates for large, growing, and small enterprises reaching 108%, 95%, and 93% respectively [17][18] - The company’s annual recurring revenue (ARR) reached 3.73 billion yuan in the first half of 2025, a year-on-year increase of 18.5%, contributing to 54.83% of total revenue [17][18] Market Trends and Future Outlook - The transition from traditional ERP to cloud-native EBC (Enterprise Business Capability) is essential for AI deployment, with predictions indicating that AI will add approximately $13 trillion to the global economy by 2030 [15][36] - The adoption of cloud-native technologies is rapidly increasing, with a projected 89% global adoption rate by 2024, indicating a significant shift in enterprise software architecture [14][35]

Core Insights - The company is a leading global provider of enterprise management cloud SaaS solutions, with a comprehensive digital solution covering the entire lifecycle of enterprises, including products like Kingdee Cloud Cangqiong and SaaS management clouds Xinghan, Xingkong, and Xingchen [1] - The company has seen a significant increase in cloud service revenue, projected to account for 83.74% of total revenue by the first half of 2025, with a CAGR of 16.84% from 2020 to 2024 [1] - The transition to cloud-native EBC is essential for AI implementation, allowing for the disaggregation of previously closed functional modules into AI-accessible service capabilities, enhancing customer stickiness [1] Group 1 - The company has achieved full-stack compatibility with major domestic innovation ecosystems, becoming a preferred choice for state-owned enterprises and Fortune 500 companies [2] - The acceleration of AI applications in enterprises is driven by advancements in large models and the emergence of Agent protocols, allowing SaaS companies to quickly penetrate the market with significant ecological advantages [2] - The growth of cross-border ERP demand is fueled by the expansion of Chinese enterprises overseas, with the company signing 259 outbound clients and local overseas enterprises, marking a 114.05% year-on-year increase [2] Group 2 - Revenue forecasts for the company are projected at 6.957 billion, 7.928 billion, and 9.059 billion yuan for 2025, 2026, and 2027 respectively, with year-on-year growth rates of 11.2%, 14%, and 14.3% [3] - The expected net profit attributable to the parent company for the same years is 0.72 billion, 3.69 billion, and 6.34 billion yuan [3] - The current price-to-sales ratios are 6.1, 5.35, and 4.69 for the respective years, with a valuation range of 610.68 to 697.92 billion HKD for 2026, rated as "outperforming the market" [3]

Group 1 - The core viewpoint of the report is that Kingdee International (00268) is a leading global SaaS service provider, with a successful push for AI products, expecting revenue growth of 11.2% in 2025, 14% in 2026, and 14.3% in 2027, with corresponding net profits of 0.72 billion, 3.69 billion, and 6.34 billion yuan respectively, leading to a market valuation range of 610.68 to 697.92 billion HKD, and an "outperform" rating [1] - The company has developed a comprehensive digital solution covering the entire lifecycle of enterprise management, with major products including the AI platform Kingdee Cloud and various SaaS management solutions, achieving 83.74% of revenue from cloud services by H1 2025, and a CAGR of 16.84% from 2020 to 2024 [1] - The company is a pioneer in the transition to cloud-native EBC management software, which breaks down closed functional modules into AI-accessible service capabilities, enhancing customer stickiness [2] Group 2 - The demand for software upgrades driven by ERP replacement and domestic alternatives is significant, with state-owned enterprises leading the increase in ERP tenders, and Kingdee's products achieving full-stack compatibility with major domestic ecosystems [3] - The acceleration of AI applications in enterprises is driven by advancements in large models and the emergence of Agent protocols, with the company integrating AI capabilities into its platform and securing contracts with major clients [4] - The growth of the global digital economy is facilitating the expansion of Chinese enterprises overseas, with the company providing comprehensive cross-border ERP solutions, signing 259 new clients in H1 2025, representing a 114.05% year-on-year increase [5]

Core Viewpoint - Guosen Securities reports that Kingdee International (00268) is a leading global SaaS service provider, with smooth progress in AI product launches, projecting revenues of 6.957 billion, 7.928 billion, and 9.059 billion yuan for 2025, 2026, and 2027 respectively, representing year-on-year growth of 11.2%, 14%, and 14.3% [1] Group 1: Company Performance and Projections - The company is expected to achieve net profits of 72 million, 369 million, and 634 million yuan for 2025, 2026, and 2027 respectively, with corresponding current price-to-sales ratios of 6.1, 5.35, and 4.69 times [1] - The estimated market valuation for 2026 is between 610.68 billion and 697.92 billion Hong Kong dollars, with a rating of "outperform the market" [1] Group 2: Product and Service Development - The company has developed comprehensive enterprise management solutions and is actively promoting AI implementation, with cloud service revenue accounting for 83.74% of total revenue in the first half of 2025 [2] - The company has transitioned to a cloud-native EBC model, which allows for AI integration and enhances customer stickiness [3] Group 3: Market Trends and Opportunities - The demand for software upgrades driven by ERP replacement is increasing, with state-owned enterprises leading the rise in ERP bidding and gradually moving towards domestic alternatives [4] - The company has achieved full-stack compatibility with major domestic innovation ecosystems, making its products a preferred choice among state-owned enterprises and Fortune 500 companies [4] Group 4: AI Integration and Application - The global development of AI has accelerated, with large models achieving new heights in various capabilities, and the focus of AI competition shifting towards deepening application scenarios and ecosystem integration [5] - The company has signed contracts with leading clients such as Hisense Group and Tongwei Co., leveraging its integrated AI capabilities [5] Group 5: International Expansion - The growth of the global digital economy is providing opportunities for Chinese enterprises to expand overseas, with the company offering comprehensive outbound solutions across various business functions [6] - In the first half of 2025, the company signed contracts with 259 Chinese enterprises and local overseas companies, marking a year-on-year growth of 114.05% [6]

Investment Rating - The report maintains an "Outperform" rating for the company [5] Core Insights - The company is a global leader in enterprise management cloud SaaS services, actively promoting AI integration into its management software [1][12] - The transition to a cloud-native EBC (Enterprise Business Capability) is essential for AI implementation, allowing for modular and flexible service offerings [1][39] - The company has seen significant growth in cloud service revenue, which accounted for 83.74% of total revenue in the first half of 2025, reflecting a shift from traditional ERP systems [23][28] Summary by Relevant Sections Company Overview - The company has established a comprehensive digital solution covering the entire lifecycle of enterprises, serving over 7.4 million businesses and government organizations globally [12] - It ranks first in various SaaS categories in the Chinese market and is the only enterprise management vendor in the top 10 of generative AI models [12] Financial Analysis - The company achieved total revenue of 3.192 billion yuan in the first half of 2025, a year-on-year increase of 11.24%, with a significant reduction in net loss [28] - The compound annual growth rate (CAGR) for revenue from 2020 to 2024 is projected at 16.84%, with improvements in gross and net profit margins [28][34] SaaS Layer - The demand for software upgrades driven by national innovation and the need for domestic alternatives presents substantial market opportunities [2][67] - The company has adapted its products to align with major domestic innovation ecosystems, becoming a preferred choice for state-owned enterprises and top 500 companies [2] Profit Forecast and Valuation - The company is expected to achieve revenues of 6.957 billion yuan in 2025, with a year-on-year growth of 11.2%, and net profits of 72 million yuan [3][4] - The report suggests a price-to-sales (PS) ratio of 6.1 for 2025, with a valuation range of 610.68 to 697.92 billion HKD for 2026 [3]