Core Viewpoint - Kingdee has successfully completed its cloud transformation, with cloud services projected to account for 82% of its business by 2024, achieving a compound annual growth rate of 31% over the past decade. The company is now transitioning into the AI era of enterprise management software, officially rebranding "Kingdee Cloud" to "Kingdee AI" [1]. Group 1: Transformation Strategy - Kingdee's CEO Xu Shaochun outlined a strategy involving seven transformations: 1. Operations shifting from daily tasks to strategic execution, focusing on urgent strategic priorities 2. Products evolving from traditional functionalities to intelligent systems with self-perception and decision-making capabilities 3. Business models transitioning from product sales to subscription or outcome-based pricing 4. Ecosystems moving from transaction-oriented to continuous intelligent symbiosis 5. Organizational structures transforming into neural network types to enhance decision-making efficiency 6. Talent competition shifting from quantity to high-density, focusing on young talents skilled in AI and innovation 7. Leadership evolving from tangible to intangible, emphasizing emotional value and motivation over control [2]. Group 2: AI Product Development - Kingdee has launched several AI products, including the enterprise-level AI native entry "Kingdee Xiao K," which serves as a platform for interconnected intelligent agents. Currently, nearly 20 intelligent agents are available, such as gross profit analysis and ESG agents, which are ready for immediate use [3]. - The company is exploring pricing models for AI applications, currently favoring organization size and usage-based pricing, similar to its cloud services, while also considering prepaid options. The overall cost for businesses is expected to decrease as AI applications become more integrated [3]. Group 3: Financial Performance and Future Outlook - Kingdee reported total revenue of 3.192 billion yuan, an 11% year-on-year increase, with cloud subscription revenue contributing 1.684 billion yuan, up 22%. The net loss narrowed by 55% to approximately 98 million yuan [4]. - The company aims to achieve profitability in 2025, with a target for AI revenue to reach or exceed 30% by 2030, indicating a significant focus on AI and SaaS integration in the coming decade [4].

Investment Rating - The report initiates coverage with an "Outperform" rating, setting a target price of 29.21 RMB based on the growth potential from AI-native agents and computing power services [1][17][42]. Core Insights - The company, established in 2003, is a seasoned fintech and data center service provider with a focus on AI technologies, serving financial institutions, government, utilities, and enterprises [43]. - The AI-native architecture is expected to unlock new enterprise AI markets, enhancing business models and improving ROI, with projected AI revenue of 208 million RMB in 2024 and signed orders of 293 million RMB [44]. - The company is leveraging its data center services to expand its computing power business, with anticipated revenue of 297 million RMB in 2024 and orders totaling 557 million RMB [45]. Financial Summary - The company forecasts revenue growth from 1,002 million RMB in 2023 to 1,684 million RMB in 2025, representing a year-on-year increase of 44.3% [2][10]. - Net profit is expected to improve from a loss of 108 million RMB in 2023 to a profit of 46 million RMB by 2027, with a significant year-on-year growth of 268.6% in 2026 [2][10]. - The earnings per share (EPS) are projected to transition from -0.32 RMB in 2023 to 0.14 RMB in 2027 [2][10]. Business Segmentation - The company operates in three main segments: fintech, artificial intelligence, and data center services. The fintech segment is expected to grow at a rate of 30% annually from 2025 to 2027, driven by strong customer retention and AI product integration [7][9]. - The artificial intelligence segment is projected to grow at 70% in 2025, 55% in 2026, and 35% in 2027, supported by a robust order pipeline [7][9]. - The data center segment is anticipated to grow at 60% in 2025, 40% in 2026, and 20% in 2027, benefiting from increased demand for computing power [7][9]. Margin and Profitability - The overall gross margin is expected to improve from 19.3% in 2024 to 22.0% by 2027, reflecting the scaling of AI products and decreasing marginal costs [8][10]. - The company aims to enhance its profitability metrics, with a projected return on equity (ROE) improving from -5.7% in 2023 to 2.4% in 2027 [2][10].