Key points of investment:
The company published its quarterly report for 24 months. The company 24H1 achieved operating income of 2.87 billion yuan, +11.9% year-on-year; realized a net loss of 0.218 billion yuan to mother, a year-on-year reduction of 65.68 million yuan. Overall performance is in line with market expectations.
ARR is in line with growth expectations and is expected to maintain a CAGR of 30% + in 24-26. According to the company's announcement, the company's 24H1 achieved ARR revenue of 3.15 billion yuan, +24.2% over the same period. As product maturity increases, it is expected that the 24-26 cloud transformation will achieve a high growth rate.
The results of cloud transformation are remarkable, and the operation is highly resilient and high quality. The company achieved cloud revenue of 2.389 billion yuan, +17.2% over the same period, accounting for more than 80%. Compared with project companies, the company showed strong operational resilience compared to project companies; the company's contract liabilities as of 24H1 reached 3.37 billion yuan, and accounts receivable (net) were 0.17 billion yuan, reflecting the characteristics of high-quality management and laying the foundation for long-term steady growth.
Major customer contracts are growing at a remarkable rate, and Sky Star provides growth impetus. During the reporting period, the company Cangqiong and Xinghan achieved a total cloud service revenue of 0.55 billion yuan, +38.9%, and the contract amount was about +63% year over year; Cangqiong and Xinghanyun's ARR subscription ratio was +29%, and the net cash renewal rate (NDR) was 97%. The major customer strategy began to pay off, and they successively signed contracts with large companies such as China National Petroleum Group and China Airlines Group, showing strong growth momentum.
Small to medium customers have a basic plan for growth and are quite resilient. During the reporting period, Starsky achieved revenue of 1.05 billion yuan, or +14.3%; ARR subscriptions were +24%, and the NDR was 95%, covering 0.042 million customers. A large number of new overseas companies were signed during the reporting period to help Chinese enterprises go overseas. Xiaowei Finance Cloud achieved revenue of 0.588 billion yuan, +17.3% YoY; Cloud subscription ARR +31% YoY. As an area where Kingdee has been working for a long time, small and medium-sized customers have shown considerable operational resilience in various industries to ensure the basic growth of the company.
In collaboration with major models such as Microsoft, AI finance and human resources have achieved product verification. Enterprise-level AI application innovation is carried out through the Sky Platform, and product verification has been carried out in Hisense Group, China's Jinmao, etc. Currently, it is cooperating with Baidu, Microsoft, AWS, Tencent and other manufacturers in the field of large models. Currently, the Sky Platform's ISV has 150+ applications, covering 19 industries. As an important direction for commercializing AI applications, the company is expected to build a new stage of growth in the AI era.
Maintain a “buy” rating. We maintain our previous profit forecast. We expect the company to achieve revenue of 6.75, 8.1, and 9.81 billion yuan in 24-26, and net profit of 0.01, 0.21, and 0.43 billion yuan. Based on the company's high operating quality during the cloud transformation period, the localization of the industry in which it is located and the trend of Chinese enterprises going overseas, and the further improvement of AI in related businesses, we maintain a “buy” rating.
Risk warning: Major customer promotions fall short of expectations, project payback falls short of expectations, and downstream prosperity falls short of expectations.