Incident: The company announced its 23 annual results, achieving total revenue of RMB 5.679 billion, an increase of 16.7%; of these, the traditional ERP business revenue increased 2% year over year to 1,174 billion yuan, and the cloud service business achieved revenue of 4.505 billion yuan, an increase of 21% year on year, and the revenue share increased by 3 pct to 79.3% year on year. Achieved gross profit of 3.644 billion yuan, corresponding to a gross profit margin of 64.2%, an increase of 2.6 pct over the previous year, mainly due to a further increase in the share of cloud service revenue and a reduction in cloud infrastructure costs; net loss to mother was 210 million yuan, a year-on-year decrease of 46.1%.
The cloud subscription service model continues to advance, speeding up the overseas business layout. The cloud service business continued to grow at a high quality. Revenue increased 21% year over year to 4.505 billion yuan, accounting for about 79.3% of total revenue. Cloud subscription service annual recurring revenue (ARR) increased 33.1% year over year to 2.86 billion yuan, and contract liabilities related to cloud subscription services increased 29.6% year over year. 1) Accelerate the seizure of large enterprise markets: In '23, Cangqiu+Xinghan signed a contract amount of 1.4 billion yuan, achieving revenue of 981 million yuan, an increase of 40.9% over the previous year; Cangqiu and Xinghan's ARR subscription increased by about 48.7% year on year, and the renewal rate exceeded 105%. The company accelerated the expansion of large-scale high-quality customers, with 1,458 major customers signed in '23, including 647 new customers, including many benchmark customers such as Sinochem, China Building Materials, and Dongfeng Motor. By the end of '23, the company had helped 221 enterprises complete localization replacement. 2) Consolidate the leading position in the medium-sized market: Starry Sky signed more than 1,400 new national and provincial specialty and new enterprises in '23, serving 43% of national specialty, special, and new small giant enterprises, maintaining a leading position in the market. In '23, Starsky achieved revenue of 1,952 billion yuan, a year-on-year increase of 16.2%. The ARR for Starsky Cloud subscriptions increased 29.2% year-on-year, the net renewal rate was 97.2%, and the number of net retained customers reached 39,000. The company plans to expand some current customers in emerging fields in the future. Starry Sky's operating profit margin continued to improve. The operating profit margin reached 22% in '23, and the profit margin of the target product line reached 20-25% in the future.
In terms of internationalization, Starry Sky has helped thousands of companies go overseas, but their overseas revenue was relatively low in '23. In the future, the company will develop business in Vietnam, Singapore, Southeast Asian countries, and Belt and Road countries. 3) Xiaowei Finance Cloud is growing rapidly: in '23, Xiaowei Finance Cloud achieved revenue of about 1,080 billion yuan, an increase of about 25.4% year on year, and Xiaowei Cloud's ARR subscription increased by about 45.6% year on year; among them, Kingdee Cloud Star's revenue increased by about 108.6% year on year, and the net renewal rate was 90.8%.
The company's future strategy is: subscription priority+AI first. 23. Jindie released an enterprise-level large model capability platform - Kingdee Cloud Cangqiong GPT, which has extensive access to general large model capabilities such as Baidu and Microsoft to help enterprises build rich intelligent applications in complex management scenarios. Based on the Kingdee Cloud Cangqiong GPT, Kingdee launched China's first major financial model. Related products have been well used by benchmark customers such as C&D Real Estate and Hisense Group. Currently, the company can provide corresponding services through the application of AI in fields such as regulatory inquiries. In '24, the company aims to launch 10 more AI-related application scenarios.
Profit forecasting, valuation and ratings: Cloud transformation and upgrading catalyze the gradual maturity of the SaaS subscription payment model. The company continues to break through leading companies with a deep understanding of business management and accelerate overseas business layout. Considering the company's careful selection of customers in some industries and the macroeconomic impact on SME customers, the 24-25 revenue forecast was slightly lowered to 65.9/7.76 billion yuan (-6%/-8% compared to the previous forecast), and the 26-year revenue forecast was increased by 8.94 billion yuan (yoy +15.2%). Considering the steady growth of the company's mature products such as Starry Sky, which are gradually contributing more profits, the losses are expected to narrow further. The GAAP net profit forecast for 24-25 was raised to -0.89/198 million yuan (the previous forecast was -208/026 million yuan), and the GAAP net profit forecast for 26 years was added to 453 million yuan. Maintain a “buy” rating.
Risk warning: Customer growth falls short of expectations; competition in the cloud services market intensifies.