In 2021, Tide International realized operating income of 3.92 billion Hong Kong dollars (+ 53.2%), of which cloud business revenue was 910 million Hong Kong dollars (+ 79.1%), and cloud business revenue accounted for 28.8% (+ 5.0 pcts) of software revenue. As far as 2021H2 is concerned, the company realized HK $590 million (+ 109.1%) from cloud business and HK $1.22 billion (+ 49.9%) from management software, which was significantly higher than the growth rates of 41.7% and 27.0% of 2021H1, respectively. Considering the broad growth space of the cloud ERP market in the domestic market and the company's rich customer resources and service experience in the field of ERP, we judge that the cloud process of the company will continue to move forward rapidly, which will lead to the steady growth of the company's overall performance. We use the SOTP valuation method, in which the traditional software business is given 10X PE (2022E); at the same time, taking into account the steady progress of the company's cloud process, we give the cloud business 6X PS (2022E), maintaining the company's target price of HK $8 per share and a "buy" rating. With the advancement of the company's cloud process, the market is also expected to accelerate the switch from valuation to comparable software SaaS.

Item: domestic Top 3 ERP manufacturer Wave International has released the financial data of the 2021 annual report. Our comments are as follows:

Financial profile: revenue performance significantly exceeded expectations and cloud business accelerated growth. In 2021, the company realized operating income of HK $3.92 billion (+ 53.2%, + 42.9% in RMB), of which HK $910 million (+ 79.1%, + 67% in RMB) from cloud business, HK $2.24 billion (+ 38.5%, + 29.2% in RMB), and HK $770 million (+ 77.5%, + 65.6% in RMB) in IoT solution business. As far as 2021H2 is concerned, the company realized HK $590 million (+ 109.1%) from cloud business and HK $1.22 billion (+ 49.9%) from management software, which was significantly higher than the growth rates of 41.7% and 27.0% of 2021H1, respectively. In terms of cloud progress, the company's cloud business revenue accounted for 23.2% (+ 3.4 pcts) of total revenue and 28.8% (+ 5.0pcts) of software revenue in 2021. The company achieved an overall gross profit margin of 31.7% (+ 2.4pcts), and the management expense rate, R & D expense rate and sales expense rate were 8.3%, 11.7% and 14.7% respectively, year-on-year-1.9pcts,-0.7pcts,-2.5pcts, respectively, reflecting the scale effect brought about by income growth. In addition, the company's other income and other net income in 2021 was HK $200 million (- 4.7%), including HK $90 million (+ 50.3%) in software tax rebate and HK $20 million (- 75.3%) allocated by the government for transformation.

In terms of profit, the company made a pre-tax profit of HK $60 million in 2021 and a net profit of HK $65 million, which was a year-on-year profit, mainly due to a sharp increase in operating profit in the management software business to HK $130 million and a loss in the cloud business that narrowed by 22.2% to HK $130 million compared with the same period last year.

Cloud business: products continue to iterate and customers expand rapidly. For the large enterprise market, the company released GS Cloud version 2110 in November 2021. In the Chinese SaaS market research report released by CCID, Chaoyun ERP ranks among the leading camp of Chinese SaaS market. At the same time, the company continued to optimize the PaaS platform iGIX, officially released iGIX 3.5, and officially opened up the low-code modeling system UBML on January 26, jointly with universities, partners, ISV and community participants to build an open source ecology. On September 27, iGIX launched the inIoT intelligent Internet of things platform; in terms of HCM Cloud, the company signed contracts with medium and large enterprises such as China Construction, China Gold and Sichuan Coal during the reporting period, ranking third in HCM SaaS market share. In terms of financial and financial cloud, the company continues to expand its cooperation with financial institutions such as Industrial and Commercial Bank of China, China Minsheng Banking Corp and Pudong Development Bank, and strategically signed contracts with Hengfeng Bank, Ningxia Bank, etc.; in cooperation with Cloud, the company also signed contracts with China Tower Corporation, Chinalco Group, Tongrentang, Bright Food and other enterprises during the reporting period. For the medium-sized enterprise market, the company released inSuite 1.2, providing online services around six categories of business scenarios: solutions, applications, implementation, interfaces, development and services, and vigorously developed channel partners to further open products and markets and strengthen the "platform + ecological" aggregation capacity. For the small and micro enterprise market, the company promotes the research and development of new versions of cloud accounting and cloud purchase, sales and storage, and develops features such as smart invoices, cloud coins, and smart account guides, actively promoting one-click filing of all taxes in batch for key cities across the country.

Management software business: a significant recovery in revenue. In terms of financial sharing, Chaochao Financial sharing uses RPA, OCR, natural language processing, knowledge graph, machine learning and other technologies to create new intelligent financial solutions, newly signed customers such as Zhejiang Guoyun, Henan Shenhuo, Tongling Nonferrous, Zhongtai Securities, Shanxi Traffic Control, Tianjin Medicine and so on. In terms of intelligent manufacturing, the company officially launched the "intelligent manufacturing +" intelligent manufacturing overall solution, covering the core areas of digital supply chain, manufacturing, quality management, intelligent factory, edge intelligence, and so on. And in ships, shield machines and other large equipment manufacturing enterprises to carry out in-depth promotion and application. In terms of operation and maintenance services, Tide Tianyuan Communications released cloud Rui iOSS2.0 series products, aiming at operator 5G and cloud network convergence business, realizing global end-to-end, automation, intelligent and agile support for network operation and maintenance, and expanding business to new business type operators in other industries, such as radio and television, Iron Tower, China Mobile Zhihang, China Mobile Internet, etc., to provide customers with intelligent operation and maintenance products and services.

Medium-term outlook: product structure optimization, customer number and ARPU growth, etc. 1) continue to promote the cloud process. At present, the company's cloud product revenue accounts for 28.8% of software revenue (+ 5.0pcts), which is in the stage of rapid development. 2) the number of customers and ARPU continue to improve, for large enterprises, due to the relatively limited customer base, continue to increase modules and functional substitution, from a single department-branch to multi-departments and other companies in the group system, and then improve the level of ARPU is the main driving force to promote subsequent growth. For medium-sized enterprises, the number of medium-sized enterprise customers of the company's cloud products has just exceeded 400. compared with the total number of 9 million medium-sized enterprises in China (with annual income exceeding 50 million), the penetration rate is only 0.04%. There is a huge penetration opportunity for medium-sized enterprise customers' inSuite products. 3) the development of partners and ecology, the richness of partners and the maturity of the platform ecology, on the one hand, can improve the company's delivery efficiency and reduce delivery costs, on the other hand, it will also borrow the development capabilities of ISV and customer internal staff to serve the long-tail needs that can not be met by standardized products, and improve customer satisfaction.

Risk factors: the risk that the development of the cloud service market is not as expected; the risk that the competition in the industry intensifies; the risk that customer maintenance and expansion is not as expected; the risk that SaaS business development is not as expected; the risk of loss of core marketing and product technical personnel of the company; the risk of major data leakage and operational accidents, etc.

Investment suggestion: considering the broad growth space of the domestic market cloud ERP market and the company's rich customer resources and service experience in the ERP field, we judge that the company's cloud process will continue to advance rapidly, which will lead to the steady growth of the company's overall performance. Based on the company's significantly better-than-expected performance in 2021, we adjust the 2022max 23 and add the 2024 profit forecast. It is estimated that the company's operating income in 2022-2024 will be HK $48.3 billion 5.93 billion (HK $34.2 billion in 2022), with a year-on-year growth rate of 23.4%, 22.6% and 23.0%, respectively (compared with 14% and 17% in 23). The estimated net profit is HK $3.3 billion respectively (the original forecast for 2022 Compact 23 is HK $1.1 billion). We use the SOTP valuation method, in which the traditional software business is given 10x PE (2022E); at the same time, taking into account the steady progress of the company's cloud process, we give the cloud business 6x PS (2022E), maintaining the company's target price of HK $8 per share and a "buy" rating. With the advancement of the company's cloud process, the market is also expected to accelerate the switch from valuation to comparable software SaaS.