20220822-招银国际-用友网络-600588.SH-Takes_time_to_build_the_cloud_platform_10页_1mb

CMB International Global Markets | Equity Research | Company Update Summary

Core Content Overview

Yonyou (600588 CH) reported its FY2Q22 results, showing strong revenue growth and a notable increase in cloud revenue. However, the report highlights concerns about the slowing growth of ARR and contract liabilities, which may indicate challenges in the cloud subscription business. The company is also increasing R&D investment for its YonBIP platform aimed at large enterprises, which could impact short-term earnings quality.

Main Points

FY2Q22 Financial Performance

• Revenue: RMB2,258 million (+15% YoY, +76% QoQ), exceeding estimates by 9% and consensus by 2%.
• Cloud Revenue: RMB1,551 million (+57% YoY, +107% QoQ), accounting for 69% of total revenue.
• Software Revenue: RMB690 million (-24% YoY, +32% QoQ).
• Gross Profit: RMB1,383 million (+11% YoY, +120% QoQ), beating estimates by 12% and consensus by 4%.
• Gross Margin: 61.2% (-2.1 pct pts YoY, +12.1 pct pts QoQ).
• Operating Profit: RMB89 million (+34% YoY, +119% QoQ), beating estimates by 7.1 pct pts.
• Operating Margin: 4.0% (+0.6 pct pts YoY, +40.3 pct pts QoQ).
• Net Profit: RMB137 million (-40% YoY, +135% QoQ), beating estimates by 11%.
• EPS: RMB0.04 (-43% YoY, +134% QoQ).

Cloud Business Insights

• ARR Growth: RMB1,680 million (+102% YoY, +2% HoH), with a slowdown in HoH growth suggesting potential issues with renewal rates.
• Cloud Contract Liabilities: RMB1,760 million (+42% YoY, +11% HoH), showing good YoY growth but slower HoH growth.
• Customer Mix: 67% of cloud revenue from large enterprises, 18% from SMEs, indicating a focus on larger clients.
• R&D Investment: Increased by 38% YoY to RMB1.32 billion, with a higher R&D capitalization rate (26.4% vs. 21.9% in FY1H21).

Earnings Revision

• Sales: Raised FY22-24E sales estimates by 1–5% to reflect better-than-expected opex control.
• Gross Profit: Maintained consistent growth with a slight increase in estimates.
• Operating Profit: Increased estimates by 8% for FY22E, 5% for FY23E, and 5% for FY24E.
• PBT and Net Profit: Adjusted estimates with small percentage changes.
• EPS: Revised upward by 5% for FY22E, 1% for FY23E, and 1% for FY24E.
• Margins: Slight changes in gross margin, operating margin, and net margin across the forecasted years.

Valuation and Target Price

• Target Price: Maintained at RMB19.81 (up from RMB19.58), based on a 5.0x FY23E EV/sales multiple.
• EV/sales: 5.2x for FY23E, with a 40% discount to global enterprise SaaS peers.
• Valuation Comparison: Yonyou is at a lower valuation compared to peers like Kingdee, Kingsoft Office, and SAP, with EV/sales below the mean and median of its peers.
• Rerating Challenges: The company's reliance on large enterprises, who are less inclined to adopt subscription models, may hinder rerating.

Key Information

Shareholding Structure

• Mr. Wang (Chairman): 41.2%
• HKSCC: 7.3%
• Mr. Guo (Vice Chairman): 3.7%

Stock Performance

• Market Cap: RMB70,017 million
• Average 3-Month Turnover: RMB630.18 million
• 52-Week High/Low: RMB40.33 / RMB16.53
• Total Issued Shares: 3,434 million

Share Performance (Relative to Market)

• 1-Month: +4.3% (vs. +7.1% relative)
• 3-Month: +10.8% (vs. +5.8% relative)
• 6-Month: -35.1% (vs. -27.8% relative)

Valuation Table (12M Forward EV/sales)

Mean and Median EV/sales

• Mean: 10.0x (FY22E), 8.1x (FY23E)
• Median: 9.1x (FY22E), 7.5x (FY23E)

Conclusion

Yonyou's FY2Q22 results show strong revenue growth, particularly in the cloud segment, but concerns remain about the slowing growth in ARR and contract liabilities. The company's increased R&D investment for the YonBIP platform may lead to short-term earnings distortions. Despite the improved opex control, the overall valuation remains low, and the reliance on large enterprises may hinder subscription model adoption. The report maintains a HOLD rating with a new target price of RMB19.81.