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].

Market Space and Transformation Demand - The demand for digital transformation in enterprises has significantly increased post-pandemic, with the core ERP market space exceeding 50 billion yuan and the broader ERP market space exceeding 100 billion yuan [1][10] - Large enterprises continue to release information technology needs in areas such as group finance, marketing, and supply chain, while medium-sized enterprises are upgrading from basic information technology to intelligent management [1][10] - There are nearly 400,000 industrial enterprises above a designated size in China, providing a substantial customer base for ERP software, with significant differences in customer unit prices across different enterprise sizes [1][10] Breakthroughs and Competitive Landscape of Domestic Vendors - The dual-channel drive of digital transformation and the "Xinchuang" policy has created significant opportunities for domestic vendors, particularly in state-owned enterprises [2][10] - Leading vendors such as Kingdee, Yonyou, and Inspur have established dominant market positions through cloud transformation and product line enhancements, with Kingdee's cloud business revenue accounting for 76% of total revenue, and Yonyou's cloud business revenue nearing 70% [2][10] - Market share is dominated by Yonyou and Kingdee, which together account for approximately 26%, while foreign vendors like SAP hold an 18% share [2][10] Technological Evolution and Application Scenario Innovation - AI technology is reshaping the application model of enterprise management software, with international vendors like Microsoft and Salesforce implementing low-code platforms combined with AI capabilities [3][10] - Domestic vendors are also leveraging AI, with Kingdee's cloud services implementing chatbots and visual recognition, while Yonyou's intelligent platform automates processes in finance, human resources, and procurement [3][10] - The combination of cloud computing and AI is lowering the barriers to software usage, with Kingdee's public cloud renewal rate reaching 90% [3][10] Xinchuang and Domestic Process - The Xinchuang policy is driving the localization of software from office applications to core business systems, with significant progress in the financial and telecommunications sectors [4][10] - State-owned enterprises have set clear digital transformation goals during the 14th Five-Year Plan, with notable increases in Xinchuang investment proportions [4][10] - Domestic vendors like Kingdee and Yonyou are gradually replacing foreign systems like SAP and Oracle in core systems of large enterprises [4][10] Future Trends - The enterprise management software market is expected to exhibit a threefold trend of "cloudification, localization, and intelligence," with cloud business revenue continuing to rise [5][10] - Driven by Xinchuang, domestic vendors are likely to increase their market share in large enterprises from the current 50% [5][10] - AI technology is anticipated to evolve from being an auxiliary tool to becoming a core productivity driver, ultimately achieving full-scenario coverage as "personal AI assistants" [5][10]