Three logical points are optimistic about Tide International:
1. Two factors drive the new demand cycle of ERP. We believe that there are two major factors driving the advent of the new demand cycle of ERP. The first is new technologies, including cloud computing, big data, AI, etc., especially cloud computing, because Saas ERP can complete the development and upgrading of software systems in the cloud, eliminating traditional offline operations and services, greatly reducing enterprise development costs, labor costs and time costs, accelerating software iteration, and making ERP more convenient for enterprises.
2. Customized development + operation and maintenance: the geographical advantages of local service providers. We believe that with the rapid popularization of ERP, ERP has changed from generalization to commercialization, and ERP in all industries has industry attributes, so the customization demand of downstream customers for ERP continues to rise. Compared with foreign manufacturers, domestic manufacturers understand the actual needs of domestic enterprises better and can provide customers with customized development with more compound needs.
3. The competitiveness of the company's products continues to enhance. In 2020, the company's market share in the domestic ERP market was 11.7%, ranking fourth, followed by UFO, SAP and Kingdee. IDC and CCID China HCM software market research report shows that Chaochao HCMCloud ranks first in China's human resources management software SaaS market TOP3 and large enterprise market. According to the 2018-2019 China PaaS Market Research report released by Jishi Information, the report shows that Chaochao entered the PaaS market and the leading camp of aPaaS market by virtue of excellent technical and market capabilities, and ranked first in overall competitiveness.
Compared with A-share Hong Kong stock cloud ERP, Tide International is significantly undervalued. In 2020, the company's cloud service revenue reached HK $506 million, an increase of 30.5% year-on-year under the adverse impact of the epidemic, and cloud revenue accounted for 19.79% of revenue. The company's cloud transformation was rapid. Other ERP cloud leading user networks accounted for 40% of cloud revenue in 2020, while Kingdee International Software Group accounted for 57% of cloud revenue. Although there is still a certain gap with the proportion of the two cloud companies, we judge that the company's cloud revenue and share will catch up quickly. At the same time, according to the Wind consensus forecast, the two companies'21-year consensus forecast PS is 11.41 times and 18.79 times respectively, while the company is less than 2 times, which is significantly undervalued.
Profit forecast. We estimate that the company's revenue from 2021 to 2023 will be HK $32.62,39.5 and HK $4.8 billion respectively, and its net profit will be HK $0.37,0.59 and HK $93 million respectively. We believe that the core value of the company lies in ERP and cloud services business. Despite the large revenue scale of the Internet of things business, the profitability and development prospects of ERP and cloud services in the face of government and enterprise software-only solutions are relatively poor. In considering valuation, we refer to comparable companies in the same industry, and out of careful consideration, we give ERP+ cloud services revenue 3-3.5 times dynamic PS in 2021. The six-month fair value range is between HK $6.58 and HK $7.67, with an "better than the market" rating.
Risk hint. The recovery of traditional ERP is not as expected, and the transformation of cloud is not as expected.