Performance preview
Revenue is expected to decline by 12% in the first half of 2022 compared with the same period last year.
We expect Ming Yuan Cloud Group's income to fall 12% year-on-year to 860 million yuan in the first half of 2022, with an adjusted net loss of 210 million yuan and an adjusted net profit of 170 million yuan in the same period last year.
Pay attention to the main points
Income growth may be weak in the first half of the year. We expect that under the high base of the same period last year, the impact of repeated epidemics and the continuing tight financing environment of downstream real estate enterprises, the revenue growth of the company's core business line will be lower than the previous management guidance for the whole year (that is, SaaS revenue is expected to grow 35-45% year-on-year). Specifically, we expect SaaS revenue to increase by 17% to 650 million yuan in the first half of the year compared with the same period last year. Under repeated outbreaks, the opening and construction of some cases and construction sites have been delayed, affecting the revenue recognition of related products (mainly Yunke and Cloud chain). ERP revenue will decline 50% year-on-year to 210 million yuan, the main negative effects include 1) housing companies IT budget tightening slowed down the pace of new signing, weak demand for value-added services, and 2) the epidemic repeatedly dragged down the progress of implementation. Looking forward to the second half of the year, despite the uncertainty, the gradual resumption of work and production in the head cities and the continued implementation of credit support policies for real estate enterprises may be expected to ease the short-term growth pressure faced by the company. We expect that the company's revenue growth for the whole year will show a "low before high" trend.
Profits are under pressure, and the effect of fee control is expected to be reflected in the second half of the year. We expect gross profit margin to fall 1.5 percentage points year on year to 78% in the first half of the year. Among them, SaaS gross profit margin may be slightly improved compared with the same period last year, mainly due to the continued contraction in sales of hardware products; we expect a significant year-on-year decline in ERP business gross margin, mainly due to reduced licensing revenue with high gross margins and implementation-related rigid costs. We expect that after adding back unsustainable expenses such as equity incentive fees, the company will record an adjusted net loss rate of 24.3% (17.6% in the same period last year), mainly affected by the continuous expansion of personnel in the previous year. With reference to industry experience, we expect that the company may promote a series of cost control measures (such as personnel optimization) to cope with the profit pressure in an uncertain environment; the effect of fee control is expected to be reflected in the second half of 2022 at the earliest.
Profit forecast and valuation
Keep profit forecasts for 2022 and 2023 unchanged. Maintain an outperform industry rating and target price of HK $15 (based on 10 times 2022 market-to-sales ratio). The company is currently trading at 8 times the 2022 market turnover rate, and our target price corresponds to 33% upside.
Risk.
The prosperity of the real estate industry is declining; the competition is intensified; the epidemic situation is repeated.