Yonyou Network released a quarterly report. 2025Q1 achieved revenue of 1.378 billion yuan (yoy -21.22%), net profit to mother of -0.736 billion yuan (yoy -62.41%), and deducted non-net profit of -0.794 billion yuan (yoy -76.00%). The company's revenue declined significantly in 25Q1, mainly affected by the year-on-year decline in contract amounts in 24Q4 and January '25. Since February '25, the company's contract amount has resumed positive growth, showing an improvement trend. We believe that AI strategy will drive the company's 25-year performance recovery to an accelerated pace and maintain a “buy” rating.
Q1 Subscription liabilities have increased, and the cloud business is expected to develop further
In 25Q1, the cumulative number of paying customers using Youyou Network's cloud service reached 0.9188 million, and 0.0463 million new cloud service paying customers were added. Subscription related contract liabilities were $2.27 billion, +25.0% YoY. Looking at customers, 1) Large enterprises: 25Q1 added 1 new first-tier central enterprise, with a total of 45 new top customers, including China's South-to-North Water Transfer, CNPC and Hydropower Fifth Bureau; 2) Medium enterprises: 25Q1 customer subscription revenue +45.6% YoY; 3) Small and micro enterprises: 25Q1 subsidiary Changjie Tongyun subscription revenue was 0.171 billion yuan, +15.6% year over year. The company's cloud transformation is progressing smoothly. We believe that although it will adversely affect revenue growth in the short term, it is expected to continue to drive revenue in the long term, and we are optimistic about the company's long-term growth space.
The personnel structure continues to be optimized, and the overall gross margin of the 25Q1 company is 39.06%, a year-on-year change of 11.79pct. The short-term decline in gross margin is obvious or mainly due to the impact of the increase in the cost of AI products, which is expected to be repaired throughout the year. The 25Q1 sales/management/ R&D expense ratio was 33.01%/22.81%/40.62%, compared with +3.82pct/+6.01pct/+9.27pct. The rate increase was clearly mainly due to the increase in personnel optimization costs. The number of employees in the 25Q1 company was 19,594, a decrease of 1,689 compared to the end of '24, and I am optimistic that AI's internal use will drive labor efficiency improvement.
AI products are progressing smoothly, accelerating product coverage and ecological expansion
In March '25, the company announced the “AI First” strategy and launched the “User BIP Enterprise AI” to create an enterprise digital intelligence platform with “AI general capability+industry competency”. 25Q1 added 15 smart devices, covering finance, human resources, supply chain, manufacturing and other fields. At the same time, the company is speeding up ecological construction and working with 18 domestic and foreign partners to establish an overseas ecological alliance to accelerate overseas business expansion. As of 25Q1, the company had a total of 3,814 registered ISV partners and 1.17 million registered developers.
Profit forecasting and valuation
Considering the short-term revenue growth pressure brought about by the subscription transformation, the revenue forecast was lowered. The company's revenue for 25-27 is 9.958, 11.018, and 12.315 billion yuan (previous values were 10.103, 11.262, and 12.698 billion yuan).
Considering that the company's gross margin is under pressure and the profit forecast is estimated to be 0.05, 0.17, and 0.31 yuan (previous values: 0.06, 0.22, 0.40 yuan) for 25-27. Referring to the comparable company 25E 5.7xPS (Wind), considering the company's product advantages and AI commercialization potential, the company was given 25E 7xPS, corresponding to a target price of 20.40 yuan (previous value 20.70 yuan, corresponding 25E 7xPS) to maintain a “buy” rating.
Risk warning: macroeconomic fluctuations; increased market competition.
