Introduction to this report:
The company embraces AI technology to continuously iterate and innovate products. Large enterprise customers are growing steadily, while subscriptions for medium, small and micro enterprise customers are growing faster. The company's gross margin increased, expense ratio decreased, and financial performance continued to improve.
Key points of investment:
Maintain the target price of 17.42 yuan and maintain the “Overweight” rating. Maintain the 2024-2026 EPS forecast of 0.07/0.14/0.23 yuan. The target price of 17.42 yuan was maintained, and an “increase in weight” rating was given.
The share of cloud service revenue continues to rise, and efficient management is beginning to bear fruit. 2024H1's revenue of 38.1 yuan increased 12.9% year over year, with cloud services of 2.85 billion yuan increasing 21.3%, accounting for 74.8%, up 5.2 pcts. The end-of-period subscription debt of 1.95 billion yuan increased by 33.8% to 68.6%, and the cloud service ARR of 2.33 billion yuan increased 13.1%. Net profit to mother - 0.794 billion yuan reduced loss 0.051 billion yuan, Q2 reduced loss 0.107 billion yuan, deducted non-net profit - 0.794 billion yuan reduced loss 0.146 billion yuan, Q2 reduced loss 0.101 billion yuan. The gross profit margin increased by 52.5% by 3.6 pct, and the sales/management/R&D expenses ratio decreased by 2.02/0.25/2.09 pct by 27.95%, respectively. The number of employees at the end of the period was 22,658, down 2.2% from the end of Q1 and 9.2% from the end of 2023.
Large customers are growing steadily, and the transformation of medium, small and micro customer subscriptions is progressing significantly. (1) The revenue of large enterprises increased by 11.2% by 2.39 billion yuan, of which cloud services increased by 1.77 billion yuan, or 16.8%, accounting for 73.9%. YonBIP's revenue increased by 42.1%, and renewal rates were 101.1%. (2) The revenue of medium-sized enterprises increased by 8.3% by 0.6 billion yuan, of which cloud services increased by 39.1% to 71.5% by 0.43 billion yuan.
YonSuite revenue increased 116.1%, and renewal rates were 92.4%. Subscription revenue increased by over 60%.
(3) In terms of small and micro customers, Changjietong's revenue of 0.46 billion yuan increased by 20.4%. Of these, cloud subscriptions increased by 35.3%, accounting for 67.9%. 0.706 million companies with cumulative payments added 0.073 million, and the customer retention rate was 79.4%. (4) Revenue from government and other public organizations increased by 13.1% by 0.28 billion yuan, of which cloud services increased by 25.8% to 76.3% by 0.22 billion yuan. Yonyou Government's revenue increased by 21.8% by 0.16 billion yuan, net profit of 0.11 billion yuan reduced losses by 324.2 billion yuan, and Shindao Technology's revenue increased by 3.6% by 0.13 billion yuan. (5) Contracts signed by overseas subsidiaries increased 34% year over year.
Deeply advance the development and application of AI technology, and continue to innovate and refine BIP products. In August 2024, the company released BIP 3 R6, YongPT 2.0, and three major industry vertical models. According to an exclusive interview with Chairman and CEO Wang Wenjing of Xinhua News Agency, based on YongPT 2.0, YonYou BIP has three important products, “Smart Friends,” “Smart Staff,” and “Smart Big Search,” which are based on intelligent systems (Agent), human-computer interaction (HCI), and RAG application frameworks, as well as more than 100 scenario-based enterprise intelligence services, including smart contracts, smart order generation, smart monthly settlement, AI interviews, and intelligent talent discovery. The company will continue to train and iterate the YongPT big model.
Risk warning: Competition in the ERP and cloud service markets is intensifying, downstream prosperity falls short of expectations, etc.