Brief performance review
On August 24, 2024, the company disclosed its semi-annual report. In the first half of the year, it achieved revenue of 3.805 billion yuan, an increase of 12.9% over the previous year; realized net profit due to mother of 0.794 billion yuan, a decrease of 51.17 million yuan over the same period of the previous year; and realized net profit without return to mother of 0.794 billion yuan, a decrease of 0.146 billion yuan over the same period last year.
Management analysis
The company promoted full subscription, and revenue from cloud services increased. In the first half of '24, the cloud services business achieved revenue of 0.285 billion yuan, up 21.3% year on year; cloud service ARR was 2.33 billion yuan, up 13.1% year on year. As of June 30, the company's subscription related contract liabilities were $1.95 billion, an increase of 33.8% over the same period last year. In terms of customers, the company's revenue from large enterprise customers was 2.388 billion yuan, up 11.2% year on year, of which cloud revenue was 1.765 billion yuan, up 16.8% year on year, YonBip revenue increased 42.1% year on year, and renewal rate was 101.1%. Yonyou BIP 3 supports Xinchuang's adaptation and security compliance. In August, the company released the R6 version, which reduced resource consumption by 50% and reduced operation and maintenance costs by 30%, which is expected to help large enterprises achieve domestic value replacement. In the first half of the year, the company signed 3 new first-tier central enterprises, with a total of 40 contracts. During the reporting period, the company's cloud-related revenue from medium-sized, small and micro enterprise customers increased by 39.1% and 35.3%, respectively, and renewal rates were 92.4% and 79.4%, respectively. Among them, YonSuite products for medium-sized enterprises are mature and will be the main driving force for the rapid growth of medium-sized subscriptions in the future. In addition, the company accelerated the expansion of overseas markets, established new subsidiaries in Indonesia, Vietnam, Japan, Mexico, Germany and the United Arab Emirates, and strengthened its business coverage in the Philippines, Cambodia and Myanmar. The amount of contracts signed by overseas subsidiaries increased 34% year-on-year in the first half of the year.
The company actively controls the size of personnel, costs and expenses, and efficient management is beginning to bear fruit. As of June 30, the number of employees in the company was 22,658, a decrease of 2,291 from the end of 23. The company's gross margin for the first half of the year was 52.5%, up 3.6 pct year on year; the gross margin for single Q2 was 54.0%, up 3.2 pct from month to month. In the first half of '24, the company's expense ratios all declined year on year, and sales, management, and R&D expenses decreased by 2.02 pct, 0.25 pct, and 2.10 pct, respectively.
The YongPT big model was updated to version 2.0, and now it has launched more than 100 intelligent applications. Among them, “Smart Friend” can achieve multiple scenarios such as knowledge questioning, application evocation, ChatBI reports, and approval process prediction; “Smart Big Search” completes permission control, tag management, knowledge filtering, and enterprise thesaurus construction; and “digital employees” can further optimize designer and console functions. Currently, companies such as Deloitte, Yutong Bus, and Master Kong Baiying already use YongPT.
Profit Forecasts, Valuations, and Ratings
We expect the company to achieve operating income of 110.98/126.44/14.487 billion yuan in 2024-2026, an increase of 13.3%/13.9%/14.6% year-on-year; achieve net profit of 0.054/0.411/0.72 billion yuan. Corresponds to 2.58/2.27/1.98 times PS, maintaining a “buy” rating.
Risk warning
Downside macroeconomic risks; market competition exacerbates risks; policy progress falls short of expectations.