Investment Rating - Maintain "Outperform" rating with a target price of 19.41 HKD for 2025, reflecting a dynamic PS of 9x [4][10]. Core Insights - The company is experiencing robust revenue growth, with a projected revenue of 6.99 billion RMB for 2025, and a net profit attributable to shareholders expected to reach 0.09 billion RMB [4][10]. - The cloud transformation is entering a harvest phase, evidenced by a 11.2% year-on-year revenue increase to 3.19 billion RMB in the first half of 2025, and a significant narrowing of net profit loss by 55.1% [11][12]. - AI integration into SaaS products is progressing well, with AI contract values exceeding 0.15 billion RMB, indicating strong demand for AI applications in enterprise management [13]. Financial Summary - Total revenue projections for 2023 to 2027 are as follows: 5.68 billion RMB in 2023, 6.26 billion RMB in 2024, 6.99 billion RMB in 2025, 7.93 billion RMB in 2026, and 9.15 billion RMB in 2027, reflecting a compound annual growth rate (CAGR) of approximately 15.4% from 2023 to 2027 [3][4]. - Gross profit is expected to grow from 3.64 billion RMB in 2023 to 6.41 billion RMB in 2027, with a gross margin improvement from 65.07% in 2024 to 70% in 2027 [8]. - The company anticipates a return to profitability with net profit projections of 0.09 billion RMB in 2025, 0.30 billion RMB in 2026, and 0.56 billion RMB in 2027, marking a significant turnaround from a net loss of 0.21 billion RMB in 2023 [3][4]. Cloud Business Performance - Cloud service revenue reached 2.67 billion RMB in the first half of 2025, up 11.9% year-on-year, with cloud subscription revenue contributing significantly to total revenue [11][12]. - The annual recurring revenue (ARR) from cloud subscriptions is projected to be 3.73 billion RMB, reflecting an 18.5% year-on-year growth [11][12]. - The company has achieved a 24.7% increase in cloud subscription contractual liabilities, indicating strong future revenue visibility [11][12]. AI Business Development - The company has successfully integrated AI into its SaaS offerings, with AI contract values surpassing 0.15 billion RMB in the first half of 2025 [13]. - New AI products launched include Cangqiong AI Agent 2.0 and various intelligent assistants, which have attracted key clients such as Hisense and Tongwei [13].

Investment Rating - The report maintains a "Buy" rating for Kingdee International (0268.HK) [4] Core Insights - The company achieved total revenue of 3.19 billion RMB in 25H1, a year-on-year increase of 11.2%, with cloud service revenue growing by 11.9% to 2.67 billion RMB [1] - The gross profit reached 2.095 billion RMB, reflecting a 15.4% year-on-year growth, resulting in a gross margin of 65.6% [1] - The company reported a net loss attributable to shareholders of approximately 97.74 million RMB, which was higher than the Bloomberg consensus estimate of a loss of 72.53 million RMB [1] Revenue Breakdown - The company restructured its revenue segments to focus on cloud subscription revenue, which accounted for 52.8% of total revenue in 25H1, up from 48.1% in 24H1 [2] - Cloud subscription revenue reached 1.684 billion RMB, a 22.1% year-on-year increase, with an annual recurring revenue (ARR) growth of 18.5% to 3.73 billion RMB [2] - The company signed 304 new clients, including major enterprises like Geely Holding and Mengniu Group, contributing to a net dollar retention (NDR) of 108% for its Cangqiong & Xinghan business unit [2] AI Commercialization Progress - The company reported AI contract amounts exceeding 150 million RMB in 1H25, with the launch of several AI-native products [3] - Active users of the AI assistant for small and micro enterprises reached 170,000, significantly improving accounting and invoicing efficiencies [3] Profit Forecast and Valuation - The revenue forecast for 25-27 has been slightly revised down to 6.9 billion, 7.7 billion, and 8.5 billion RMB respectively, reflecting a minor adjustment due to macroeconomic impacts [4] - The net profit forecast for 25-27 has been upgraded to 160 million, 480 million, and 880 million RMB respectively, indicating a positive outlook for profitability [4] - The report emphasizes that Kingdee, as a leading domestic ERP provider, is expected to enhance its product capabilities with AI integration [4]

Financial Performance - The company reported a revenue of RMB 3.192 billion for the six months ending June 30, 2025, representing a year-on-year increase of 11.24% [1] - Gross profit reached RMB 2.095 billion, up 15.43% year-on-year [1] - The loss attributable to equity holders narrowed to RMB 97.738 million, a decrease of 55.14% compared to the previous year [1] - Basic loss per share was 2.78 cents [1] Cloud Subscription Business - The cloud subscription revenue grew from approximately RMB 1.38 billion in the same period of 2024 to approximately RMB 1.684 billion, marking a year-on-year increase of about 22.1% and accounting for approximately 52.8% of total revenue [1] - Annual Recurring Revenue (ARR) from cloud subscriptions was approximately RMB 3.73 billion, an increase of 18.5% year-on-year [1] - The contract liabilities for cloud subscription business amounted to approximately RMB 3.378 billion, reflecting a year-on-year growth of about 24.7% [1] AI Integration and Innovations - The company has integrated AI technology deeply into all its SaaS products, services, and operational processes, with AI contract amounts exceeding RMB 150 million during the reporting period [2] - New AI platforms and tools were launched, including the Cangqiong AI Agent 2.0 and various AI-native agents, which have signed contracts with key clients such as Hisense Group and China Minmetals [2] - The collaboration with Hebei Steel Group aims to establish an "AI + Management Innovation Center" to enhance intelligent management capabilities [2] Support for Small and Micro Enterprises - The company has achieved full-process intelligent support for financial and tax scenarios for small and micro enterprises, with active users of AI assistants reaching 170,000 [3] - The AI + Tax application has helped thousands of small and micro enterprises improve bookkeeping efficiency by approximately 80%, invoicing efficiency by about 40%, and tax filing efficiency by around 60% [3] Global Expansion Strategy - The company is actively pursuing a global strategy, expanding into Southeast Asia and the Middle East [3] - During the reporting period, the company signed contracts with 259 Chinese enterprises going abroad and local overseas companies, covering various industries such as modern services and high-tech electronics [3] - The company provided digital infrastructure for local enterprises in Singapore, facilitating comprehensive collaboration and intelligent monitoring in the bulk trade industry [3]

Group 1 - The summit "AI + Management, Achieving Excellence - Kingdee Cloud · Starry Sky" was held in Shenzhen, gathering over 800 representatives from leading manufacturing companies, industry experts, and ecological partners to discuss the transformation of the manufacturing industry in the AI era [1] - Shenzhen's manufacturing leadership is attributed to the willingness of its enterprises to embrace change, with Kingdee serving as a notable example of successful transformation from a traditional enterprise to a cloud service giant [3] - Kingdee's Chairman and CEO Xu Shaochun emphasized three core viewpoints: AI will significantly drive enterprise innovation, companies should leverage processes and data for knowledge transformation, and while embracing AI, they must also remain cautious of its risks [3] Group 2 - Huang Wei, Director of the National Applied Mathematics Center at Southern University of Science and Technology, analyzed the challenges faced by the manufacturing industry, highlighting the limitations of traditional ERP systems and the emergence of AI-driven EBC 2.0 as a future trend [5] - Kingdee's Executive Vice President Zhao Yanxi noted that manufacturing enterprises are experiencing nine major changes due to the combined impact of AI, trade wars, and new globalization, transitioning from traditional MRP to a more intelligent EMAI era [5] - Kingdee has integrated AI technology to assist manufacturing in achieving intelligent transformation across various functions, including R&D, production, quality, supply chain, marketing, human resources, and finance [5] Group 3 - Kingdee Cloud · Starry Sky has provided digital transformation services to over 44,000 enterprises and has maintained the top market share in China's application software market for growing enterprises for 21 consecutive years [6] - In Shenzhen, Kingdee has served over 70% of the national-level specialized and innovative "little giant" enterprises, becoming a preferred partner for leading companies such as Dazhu Laser and Hainengda [6] - The collaboration between Kingdee and Hainengda resulted in the successful implementation of 136 processes within three months, integrating multiple systems to enhance the company's global and intelligent development [6] Group 4 - Didi Enterprise Edition is collaborating with Kingdee to create a one-stop smart solution for business travel and expense management aimed at high-growth enterprises, facilitating their digital transformation [7]