Summary of Empyrean Technology Co Ltd Conference Call Company and Industry Overview - **Company**: Empyrean Technology Co Ltd (Ticker: 301269.SZ) - **Industry**: Greater China Technology Semiconductors - **Market Cap**: Rmb63,122.4 million - **Stock Rating**: Equal-weight - **Price Target**: Rmb115.00 - **Current Price (as of May 28, 2025)**: Rmb116.26 - **Average Daily Trading Value**: Rmb495 million Key Points and Arguments 1. **Impact of EDA Restrictions**: The Trump Administration has reportedly requested leading Electronic Design Automation (EDA) companies, including Synopsys and Cadence, to stop shipping tools to China. This has led to significant stock declines for these companies, with Cadence down 10.7% and Synopsys down 9.6% [1][2] 2. **Market Share Dynamics**: In 2024, Cadence, Synopsys, and Siemens held 82% of China's EDA market share, while Empyrean Technology accounted for 10%. If U.S. export restrictions tighten, it may accelerate the adoption of local EDA tools in China, potentially benefiting Empyrean [2] 3. **Financial Projections**: - **Revenue Estimates**: - 2024: Rmb1,222 million - 2025: Rmb1,558 million - 2026: Rmb2,000 million - 2027: Rmb2,666 million - **EPS Estimates**: - 2024: Rmb0.20 - 2025: Rmb0.66 - 2026: Rmb1.16 - 2027: Rmb1.65 [4] 4. **Valuation Methodology**: The base case value is derived from a residual income model, assuming a constant cost of equity at 8% and medium-term growth rates of 25% [6] 5. **Risks**: - **Upside Risks**: Faster-than-expected breakthroughs in digital IC EDA, fewer restrictions on semi equipment access, and an increase in local EDA talent [8] - **Downside Risks**: Slower breakthroughs in EDA, more restrictions on semi equipment access, and a drought in local EDA talent [8] Additional Important Information - **Earnings Growth**: The company is expected to see significant earnings growth, with EPS projected to increase from Rmb0.20 in 2024 to Rmb1.65 by 2027 [4] - **Market Position**: Empyrean's current market position may improve if local EDA tools gain traction due to geopolitical tensions affecting foreign EDA companies [2] - **Analyst Coverage**: The report includes multiple analysts from Morgan Stanley, indicating a robust research backing for the company's outlook [3] This summary encapsulates the critical insights from the conference call regarding Empyrean Technology Co Ltd and the broader semiconductor industry context.

Investment Ratings - Maintain Buy on Empyrean, Kingdee, and Kingsoft Office; Neutral on Yonyou and Glodon; Sell on ZWSOFT, Thundersoft, Primarius, and Sangfor [1] Core Insights - The average revenue growth for the software sector in 1Q25 was 6% YoY, while the average net margin was -3% due to weak seasonality [4][10] - Companies are focusing on high-quality products with better margins, new product upgrades, and AI features to drive growth in 2H25 [1] - Profitability improvement is a key focus, with companies implementing headcount optimization and cost control measures [1] Company Summaries Glodon - 1Q25 revenues decreased by 5% YoY to Rmb1.2 billion, attributed to muted demand from the property market and headcount optimization [6] - The company is enhancing its AI capabilities and focusing on cost management and product mix improvement [7] - Earnings estimates for 2025-27E have been revised down by 18%/16%/14% mainly due to lower revenue from construction management software [11] Thundersoft - 1Q25 revenue grew by 25% YoY, supported by IoT software and smartphone software recovery [16] - Gross margin improved to 36.3%, but Opex ratio increased to 32.6% due to higher spending on AI edge solution development [16] - Earnings estimates for 2025-27E have been revised down by 2% across the board, reflecting higher Opex spending [20] Empyrean - 1Q25 revenues increased by 10% YoY to Rmb234 million, with expectations for sequential growth due to new product ramp-up [25] - The company plans to expand its digital EDA tools and has announced an acquisition plan for Xpeedic [25][26] - Earnings estimates for 2025-27E have been revised down by 42%/27%/20% mainly due to lower revenues from panel EDA tools [29] Yonyou - 1Q25 revenue decreased by 21% YoY to Rmb1.4 billion, missing estimates due to a slowdown in new project wins and migration to a subscription model [33] - The company reported a net loss of Rmb736 million, attributed to lower gross margin and higher Opex spending [33]