Core Logic - The company is a leading ERP enterprise with improving fundamentals, accelerating AI progress, and rapid growth in overseas business, suggesting that future growth driven by AI may exceed expectations [1] Market Expectations - The company's performance is recovering, and AI business progress may take time; however, the inflection point in performance has been observed, with accelerating AI advancements and potential expansion of overseas AI products [1] - For the first half of 2025, the company expects revenue between 3.56 billion and 3.64 billion yuan, a year-on-year decline of 6.4% to 4.3%, but the second quarter is projected to show revenue growth of 6.1% to 10.0% [1][2] Profitability - The company anticipates a net loss attributable to shareholders of 875 million to 975 million yuan for the first half of 2025, with a significant reduction in losses in the second quarter compared to the previous year [2] - The net cash flow from operating activities showed improvement, with a net inflow in the second quarter, reflecting an improvement of approximately 320 million yuan year-on-year [2] Driving Factors - The gradual recovery of the company's performance is supported by a favorable macroeconomic environment [3] - The AI industry trend is driving the company's AI product advancements, with multiple product releases and innovations, including the launch of the YonGPT2.0 model and various enterprise services [3][4] International Expansion - The company's overseas business revenue has grown by over 50% year-on-year, with a presence in over 40 countries and regions, serving more than 1,300 large and medium-sized enterprises [7] - The demand for AI products from overseas clients is expected to expand, leveraging the company's existing product offerings [8] Research Value and Profit Forecast - The company is projected to achieve revenues of 9.881 billion, 10.986 billion, and 12.520 billion yuan from 2025 to 2027, with year-on-year growth rates of 7.96%, 11.18%, and 13.96% respectively [9] - The company is compared to peers in the ERP and industrial software market, with a reasonable P/S ratio of 7.59x, indicating over 40% upside potential from the current P/S of 5.39x [10]

Investment Rating - The investment rating for the company is "Buy" (maintained) [4][12]. Core Views - The company is experiencing a performance turning point, with a gradual improvement in its fundamentals driven by a better macro environment and advancements in AI products [3][11]. - The company has reported a significant narrowing of losses in the second quarter, indicating a positive trend in revenue growth after a period of decline [1][2]. - The company is actively embracing AI, launching multiple innovative products that enhance efficiency and reduce costs for clients across various sectors [3][4][10]. Summary by Relevant Sections Revenue and Profit Outlook - The company expects to achieve revenue between 3.56 billion to 3.64 billion yuan in the first half of 2025, representing a year-on-year decline of 6.4% to 4.3%. However, the second quarter alone is projected to show a revenue increase of 6.1% to 10.0% [1]. - The anticipated net loss for the first half of 2025 is between 875 million to 975 million yuan, with a significant reduction in losses in the second quarter compared to the previous year [1]. Cash Flow Improvement - The company reported a net inflow of cash from operating activities in the second quarter, improving by approximately 320 million yuan year-on-year, with a cumulative improvement of about 600 million yuan in the first half [2]. AI Product Development - The company has launched the YonGPT2.0 model and various AI-driven products, enhancing its service offerings in finance, human resources, and supply chain management [3][4]. - The integration of AI into the company's core product, BIP3, has improved system flexibility and reduced resource consumption by 50% and operational costs by 30% [4]. Market Expectations and Growth Projections - The company is expected to see revenue growth from 9.15 billion yuan in 2024 to 12.52 billion yuan in 2027, with year-on-year growth rates of 7.96%, 11.18%, and 13.96% respectively [15]. - The company’s P/S ratio is projected to decrease from 5.82 in 2024 to 4.26 in 2027, indicating potential for valuation expansion [12][15]. International Expansion - The company has seen over 50% growth in overseas business revenue, with a presence in over 40 countries and regions, indicating a strong international demand for its AI products [10][11].

Investment Rating - The investment rating for the company is "Outperform the Market" [6][31] Core Views - The company's core product BIP3 has seen an increase in revenue contribution, and AI products are expected to drive a recovery in performance [1][4] - The company faced significant pressure on its annual performance, with a revenue decline of 6.57% year-on-year in 2024, resulting in a net loss of 2.061 billion yuan, a decrease of 113.13% [1][9] - The fourth quarter of 2024 showed a revenue of 3.415 billion yuan, down 16.48% year-on-year, with a net loss of 606 million yuan, reflecting a drastic decline of 1058.37% [1][9] Summary by Sections Financial Performance - In 2024, the company achieved a total revenue of 9.153 billion yuan, down 6.57% year-on-year, and a net profit attributable to shareholders of -2.061 billion yuan, down 113.13% [1][5] - The company’s revenue in Q4 2024 was 3.415 billion yuan, a year-on-year decrease of 16.48%, with a net profit of -606 million yuan, reflecting a significant decline [1][9] - The company’s gross margin for 2024 was 47.54%, a decrease of 3.19 percentage points from the previous year, with a net margin of -22.61%, down 13.08 percentage points [16] Business Segments - The cloud service business generated revenue of 6.85 billion yuan in 2024, with the core product BIP3 contributing 3.14 billion yuan, an increase of 2.4 percentage points year-on-year [2] - The company has seen a 7.9% year-on-year growth in cloud service revenue from medium-sized enterprises, with a renewal rate for YonSuite reaching 95% [2] - The company has established subsidiaries in Vietnam, Japan, and Germany, with overseas business revenue growing over 50% year-on-year [3] Future Outlook - The company is expected to gradually recover its performance, with projected net profits of -554 million yuan, 256 million yuan, and 1.051 billion yuan for 2025, 2026, and 2027 respectively [4][31] - Revenue growth is anticipated to stabilize with expected increases of 8.86%, 9.43%, and 11.61% for the years 2025 to 2027 [32] - The gross margin is projected to improve to 52.67%, 56.32%, and 58.53% over the same period [24][32]

Core Viewpoint - The company reported a decline in total operating revenue and an increase in net loss for 2024, indicating ongoing challenges during its transformation phase [1][2]. Group 1: Financial Performance - In 2024, the company achieved total operating revenue of 9.153 billion, a year-on-year decrease of 6.6% [1]. - The net profit attributable to shareholders was a loss of 2.061 billion, which is an increase in loss by 1.09 billion compared to 2023 [1]. - The actual revenue was in line with the forecast median, while the actual loss slightly exceeded the forecasted net loss range of 1.72-1.92 billion [1]. Group 2: Revenue Drivers - The decline in operating revenue was primarily due to a temporary delay in customer demand and a decrease in signed amounts [1]. - The transition to a subscription business model has impacted short-term overall revenue [1]. - The increase in losses was attributed to higher amortization of capitalized intangible assets, increased employee compensation due to layoffs, and higher goodwill impairment losses [1]. Group 3: Cloud Transformation and AI Strategy - In 2024, the cloud service business generated revenue of 6.85 billion, a year-on-year decrease of 3.4%, while subscription revenue grew by 26.0% [2]. - The company reported contract liabilities of 3.05 billion, an increase of 8.8% from the end of 2023, with cloud-related contract liabilities growing by 13.0% [2]. - The company launched the enterprise service model YonGPT2.0, focusing on AI and agent technologies to bridge complex enterprise needs with general models [2]. Group 4: Future Outlook - The company maintains an "overweight" rating despite adjusting profit forecasts for 2025-2026 due to lower-than-expected client investment and ongoing transformation impacts [3]. - Projected revenues for 2025-2027 are 10.51 billion, 12.19 billion, and 14.18 billion, respectively, with net profits of 0.1 billion, 0.41 billion, and 0.84 billion [3]. - The company is expected to benefit from the successful advancement of its cloud and AI initiatives, with a clear industry position and potential for long-term growth [3].

Investment Rating - The report maintains an "Outperform" rating for the company [1] Core Views - The company is currently in a transformation phase, facing overall pressure, but AI empowerment is expected to drive future growth [1] - The company's revenue for 2024 is reported at 9.153 billion yuan, a decrease of 6.6% year-on-year, with a net loss of 2.061 billion yuan, which is an increase in loss compared to the previous year [6] - The decline in revenue is attributed to delayed customer demand and the impact of transitioning to a subscription business model [6] - The company’s cloud service revenue for 2024 is 6.85 billion yuan, a decrease of 3.4% year-on-year, while subscription revenue has grown by 26% [6] - The company has launched an enterprise service model, YonGPT2.0, focusing on AI and agent technologies, which are seen as strategic priorities for future growth [6] - The long-term growth potential is supported by the successful advancement of cloud business and AI initiatives, despite short-term challenges [6] Financial Data and Profit Forecast - Total revenue projections for 2025-2027 are 10.505 billion, 12.187 billion, and 14.181 billion yuan respectively, with expected growth rates of 14.8%, 16.0%, and 16.4% [5] - The forecasted net profit for 2025 is 101 million yuan, with significant improvements expected in subsequent years, reaching 410 million yuan in 2026 and 838 million yuan in 2027 [5] - The company’s gross margin is projected to stabilize around 49.4% in 2025, improving to 51.6% by 2027 [5] - The return on equity (ROE) is expected to turn positive by 2025, reaching 1.2% and improving to 8.7% by 2027 [5]