The company's recent situation
On May 24, the company held the 2024 Investor Open Day. The company management introduced the latest developments in BIP products and 2024 business strategies and goals, and invited benchmark customers to introduce the deployment status and application results of BIP and YonSuite. We believe that the company's BIP 3 series products have gradually matured, the business organization structure has been reformed and improved, and efficient management continues to advance. We expect the company to stabilize revenue growth and turn loss into profit on the profit side in 2024.
reviews
BIP products are gradually maturing, and a new product cycle is expected to begin. Since its launch in August 2022, Yonyou BIP 3 has continued to improve its maturity through model customers. It has now iterated to the R5 version, and plans to release R6 products in September, focusing on improving “easy to deploy and use” capabilities. We believe that the company's BIP products will gradually mature as delivery capabilities continue to improve or usher in a new round of product cycles.
In terms of AI applications, the company focused on data services and intelligent services, and showcased the three major categories of YongPT applications:
With intelligent smart friends (implementing functions such as data viewing based on natural language instructions), digital intelligence employees (implementing shared task review functions), and intelligent big search (realizing enterprise unstructured data search based on RAG technology), we expect orders to be fulfilled within the year as AI products gradually mature.
SaaS and subscription systems continue to advance, and gross margin may increase steadily. The company reaffirms that it will adhere to its long-term position as a product-based company and continue to promote the SaaS and subscription-based business model for large enterprises, medium-sized enterprises, and small and micro enterprises. 1Q24 has contract-related liabilities of 1.82 billion yuan, or +32.4% over the same period. Among them, the company made more vigorous efforts to fully shift the business of medium-sized enterprise customers to a subscription business model, and subscription revenue achieved a rapid growth of over 60%. As the share of revenue from the subscription business increases, we expect the company's gross margin to continue to rise.
Customers talk about BIP: the results of digital intelligence operations are remarkable. At the conference, the company invited benchmark customers to introduce the deployment and application of BIP and YonSuite: 1) SDIC Cloud Network: Youyou launched an accounting, merger, treasury, and financial sharing system in 6 months, to implement a consolidated reporting system for more than 500 companies under the Group and to issue monthly consolidated statements 2 days ahead of schedule; 2) Rifeng Management: YonSuite's rapid deployment capabilities on a 2-3 week cycle to help the company achieve rapid global business coverage.
The efficient management strategy remains unchanged, and the full-year outlook turns losses into profits. The company's short-term performance has been affected by factors such as BIP's high investment in R&D over the past few years, and the upgrading of high-end and mid-tier business organizations. We believe that with the gradual maturity of the company's products, completion of business organization adjustments, and continued promotion of efficient management, it is expected that revenue growth will stabilize and turn losses into profits in 24 years.
Profit forecasting and valuation
Keep the profit forecast unchanged, maintain the industry rating and target price of 16 yuan (based on the 2024 SOTP). The upward space is 43.8%, and the current price corresponds to 3.4x/3.0x 2024e/2025e P/S.
risks
Industry demand fell short of expectations; R&D and sales side investment exceeded expectations; industry competition intensified.