Core Viewpoint - Kingdee International (0268.HK) reported a continued loss in the first half of 2025, with a loss of 97.738 million yuan, accumulating over 1.4 billion yuan in losses over the past five and a half years [1][2]. Financial Performance - In the first half of 2025, Kingdee International achieved revenue of 3.192 billion yuan, a year-on-year increase of 11.2%, while the loss attributable to equity holders narrowed by 55.1% compared to the previous year [2][3]. - Cumulative losses over five and a half years reached 1.477 billion yuan [2]. Cost Structure - Research and development expenses were controlled at 777 million yuan, down 3.8% year-on-year, while sales expenses rose to 1.264 billion yuan, an increase of 3.18%, marking a historical high for the period [3]. - Administrative expenses increased by 39% to 346 million yuan due to personnel restructuring and severance payments [3]. Strategic Focus - The company has accelerated its AI transformation, launching several AI-native products in the first half of 2025, including the Cloud AI Agent platform 2.0 and various intelligent assistants [3]. - AI contract amounts exceeded 150 million yuan, with expectations that AI revenue could account for 30% of total revenue by 2030 [3]. Business Segments - The cloud service business remains the largest revenue source, contributing over 80% of total revenue, with a revenue of 2.673 billion yuan in the first half of 2025, growing approximately 11.9% year-on-year [5]. - However, the growth rate of cloud service revenue has been declining, with previous growth rates of 35.5%, 21.5%, and 17.2% from 2022 to 2024 [5]. Market Performance - In the large enterprise market, Kingdee's cloud services performed well, generating approximately 845 million yuan, a year-on-year increase of 34.3% [6]. - The mid-sized market showed weaker performance, with customer growth stagnating and a decline in new contracts signed [6]. - The small enterprise segment also faced challenges, with renewal rates below industry standards despite customer growth [6]. International Expansion - Kingdee is actively expanding its overseas business, particularly in Southeast Asia and the Middle East, but revenue from international operations remains low at 41.61 million yuan, accounting for only 1.32% of total revenue [7]. - The company has faced challenges in penetrating the high-end enterprise market dominated by international giants like SAP and Oracle [7]. Shareholder Sentiment - Recent shareholder reductions indicate a lack of confidence in the company's ability to turn around its financial performance, with stock prices significantly down from historical highs [8].

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The company reported a revenue of 6.256 billion yuan for 2024, representing a year-on-year growth of 10.2%. The cloud business contributed 5.107 billion yuan, growing by 13.4% and accounting for 81.6% of total revenue. The annual recurring revenue (ARR) from cloud subscriptions reached 3.43 billion yuan, up 20% year-on-year, with contract liabilities increasing by 28.5%. The net loss attributable to shareholders for 2024 was 142 million yuan, an improvement from a loss of 270 million yuan in 2023 [4][5] Summary by Sections Financial Performance - For 2024, the company achieved a revenue of 6.256 billion yuan, with a year-on-year increase of 10.2%. The projected revenues for 2025, 2026, and 2027 are 7.040 billion yuan, 7.965 billion yuan, and 8.912 billion yuan, respectively, indicating growth rates of 12.5%, 13.1%, and 11.9% [10] - The net profit for 2024 was a loss of 142 million yuan, with forecasts of 96 million yuan, 237 million yuan, and 416 million yuan for 2025, 2026, and 2027, respectively, showing significant year-on-year growth of 167.9%, 145.8%, and 75.4% [10] Product Development - The company has fully empowered its products with AI, leading to a revenue of 1.304 billion yuan from its large client offerings, which grew by 32.9% year-on-year. The total contract value reached approximately 2.1 billion yuan, up 51.9% year-on-year [5] - The small and micro product segment also saw the implementation of AI features, generating 1.229 billion yuan in revenue, a year-on-year increase of 13.8%, with a net renewal rate of 93% [5] Future Outlook - The company expects revenues for the fiscal years 2025 to 2027 to be 7.040 billion yuan, 7.965 billion yuan, and 8.912 billion yuan, respectively, with net profits projected at 96 million yuan, 237 million yuan, and 416 million yuan [7][10] - The company maintains a "Buy" rating based on these projections, indicating confidence in its growth trajectory and profitability improvements [7]