FY2024 results are in line with market expectations
Beisen Holdings announced fiscal year 2024 results: revenue increased 13.8% year over year to 0.855 billion yuan, and adjusted net loss to mother narrowed from 0.301 billion yuan in FY2023 to 0.105 billion yuan in FY2024, all in line with the company's previous profit warnings and market expectations.
Development trends
Downstream demand picked up marginally, and growth recovered as scheduled. Thanks to balanced customer base industry distribution and leading integrated solution capabilities, the company's growth resilience was highlighted during economic cycle fluctuations. The ARR growth rate gradually recovered to 16% in FY2024 from 12% in FY2023. Among them, the total number of cloud HCM solution customers increased 8.1% year over year to 5,532, and the average customer ARR increased 7.7% year over year to 0.137 million yuan. The company actively promotes multi-module sales for new customers and additional purchases for old customers. As of March 31, 2024, the ARR share of customers who purchased two or more modules was about 72%. The average number of modules purchased by customers increased from 1.6 the previous year to 1.8, and the subscription revenue retention rate for existing customers reached 106%. Looking ahead to fiscal year 2025, the company will advance its business strategy around the following aspects: 1) fully supporting Chinese enterprises to go overseas. The company's products will be scenario-based capability design in multiple languages, multiple time zones, multiple currencies, and overseas compliance by September 2024; 2) creating “digital talent” products for large-scale enterprise cadre management; 3) launching AI scenarios that understand more talents and promoting the commercialization of “AI interviewers”; 4) Continue to focus on the strategies of central enterprises and large customers to further enhance the coverage of core HCM solutions among customers with 10,000 employees or more) Actively develop ecological partners and strengthen solutions and project delivery capabilities. We expect the company's ARR growth to accelerate further in FY2025.
Losses continued to narrow. Thanks to changes in the company's process organization and improvement of the operating system, the company's adjusted gross margin improved by 7.6 percentage points to 64.0% year on year; among them, the adjusted gross margin of the cloud HCM solution improved by about 3.8 percentage points to 78.8% year on year, and the adjusted gross margin of professional services increased significantly by about 12.5% to 22.0% year over year. Thanks to improvements in management, product and operational efficiency, the company's adjusted net interest rate narrowed sharply by 27.7% to -12.3% year-on-year. Looking ahead to fiscal year 2025, we expect the company's adjusted net loss to be narrowed further to less than 10%
Profit forecasting and valuation
The profit forecast for the 2025 and 2026 fiscal years remains largely unchanged. Maintain the outperforming industry rating, and reduce the target price by 8% to HK$6 (corresponding to 4 times the FY2025 market-sales ratio), taking into account the downward trend in the valuation center. Currently, the company is trading at 3 times the FY2025 market sales rate, corresponding to 47% upward space.
risks
The macroeconomy is weak; industry competition intensifies; product iterations fall short of expectations.