Summary of Kingdee International Conference Call Company Overview - Company: Kingdee International - Industry: China Software/SaaS Key Points and Arguments Performance Highlights - Kingdee's stock has outperformed significantly year-to-date, with a gain of 77%, compared to 32% for HSTECH and 36% for its peers [1][2] - The company achieved a 10% revenue growth in FY24, reaching RMB 6.3 billion, which is notable against peers like Yonyou, which experienced a 7% revenue decline [7][19] - Operating cash flow reached a near-record of RMB 934 million, up 43% year-over-year [7][19] - Despite a -2% net profit margin, Kingdee's performance was characterized as "very respectable" given macroeconomic challenges [7][19] Financial Metrics - Kingdee's adjusted EPS for FY25E is projected at RMB 0.08, down from a previous estimate of RMB 0.12 [5] - The company maintains a 6x EV/sales multiple for FY25E, which is considered reasonable compared to global ERP peers trading at around 8x [2][14] - The gross profit margin improved to 65.1%, up 90bps from the previous year [19] Market Position and Growth Potential - Kingdee is viewed as the best play in the China software/SaaS space, benefiting from policy tailwinds from Digital China and localization efforts [10][14] - The company is expected to continue double-digit top-line growth, with a projected 13% CAGR from FY24 to FY27 [14] - Kingdee's cloud products, particularly Cloud Cosmic and Constellation, showed strong growth, with a 33% increase in revenue [19] Challenges and Risks - Annual recurring revenue (ARR) growth decelerated to 20%, down from 34% in FY23, primarily due to macroeconomic headwinds affecting mid-sized enterprises [17][19] - The large enterprise segment, while growing at 30%, still represents a small portion (26%) of total cloud revenues [17][19] Valuation Insights - The price target for Kingdee is set at HK$ 17.5 by December 2025, based on DCF analysis, implying a 7x forward EV/Sales [11][14] - The valuation reflects a sustainable net margin potential of 20-30% as the company ramps up its operations [14] Additional Considerations - Kingdee's management will host an FY24 results briefing on March 18, 2025, which will provide further insights into the company's performance and outlook [20] - The company has a strong cash position with approximately RMB 4 billion in net cash as of the end of FY24 [19] Conclusion Kingdee International is positioned strongly within the China software/SaaS industry, demonstrating resilience and growth potential despite macroeconomic challenges. The company's focus on cloud services and strategic positioning in the market, combined with a reasonable valuation, makes it a compelling investment opportunity.
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