20180814-兴业金融证券-金蝶国际-00268.HK-Heading_To_a_New_Era_Of_Enterprise_Services_8页_418kb

Kingdee Summary

Core Content

Kingdee, a leading enterprise resource planning (ERP) software provider, launched its Next Generation Cloud Service Platform, which is designed to integrate all enterprise applications into a single platform. The platform offers a range of features, including SaaS services for finance, HR, procurement, manufacturing, CRM, logistics, distribution, financing, and industry cloud, as well as PaaS capabilities with communication, big data, AI, and IoT functionalities.

The platform is highlighted for its user-friendly interfaces, real-time management reporting, and customization capabilities, which are seen as significant advantages. However, the report acknowledges that revenue from this new product may not be significant in the short term, as large enterprises are typically resistant to change and the implementation process for such a comprehensive system is lengthy and complex.

Main Points

• Product Leadership: Kingdee's new platform is praised for its flexibility and integration of all enterprise functions, positioning the company as a leader in cloud ERP.
• Target Market: The platform is aimed at large enterprises, with an annual fee per customer expected to exceed CNY1m, reflecting the value of the comprehensive features.
• Valuation Update: The report raises the price-to-sales (P/S) multiple for the cloud business from 12x to 15x, implying a target price (TP) of HKD12.17, which is 11% upside from the current price of HKD11.00.
• P/E Multiple: The TP also implies a 51x P/E multiple for FY19F, which is a significant valuation driver.
• Competitive Landscape: Kingdee faces intense competition, particularly from Yongyou, which serves large customers and has sticky relationships with them.

Key Features of the Platform

• User-friendly and flexible interfaces: Users can customize their interface and communicate with relevant users online with one click.
• Real-time management reporting: Offers powerful, multi-dimensional data for management decision-making.
• Customization capabilities: Enables users to tailor the platform to their specific needs.

Financial Forecasts and Valuations (FY19F)

Key Risks

• Short-term revenue constraints: The new cloud product may not generate significant revenue quickly due to the difficulty in gaining large enterprise clients and the lengthy implementation process.
• Intensifying competition: Kingdee's cloud business faces competition from established players like Yongyou.
• Traditional ERP margin pressure: The company's traditional ERP business may face margin compression.
• Potential share dilution: The conversion of convertible bonds may dilute shareholder value.
• Uncertainty in long-term growth: While the cloud ERP is expected to be successful over time, the long-term outlook remains uncertain.

Strategic Positioning

• Strong R&D team: Kingdee has a proven track record in ERP software development.
• First-mover advantage: It has a strong position in the Cloud ERP market, which is seen as having large growth potential.
• Existing customer base: The company already has a solid base in the SME sector, which is vulnerable to economic downturns.

Investment Recommendation

• Maintain BUY: The analyst recommends maintaining the BUY rating, citing the positive outlook on the company's cloud ERP and the revised valuation multiple.
• Target Price (TP): HKD12.17, reflecting a 15x P/S multiple for the cloud business.
• Estimated Return: 11%.
• Market Cap: USD4.61m.

Shareholder and Performance Data

• Major Shareholders:
  • Chairman Xu: 27.0%
  • Oriental Gold Limited: 14.5%
  • JD.com: 10.0%
• Share Performance (YTD):
  • Absolute: 150.0%
  • Relative: 156.6%

Valuation Metrics

Financial Model (FY19F)

SWOT Analysis

• Strengths:
  • Strong R&D team
  • Proven ERP software track record
  • First-mover advantage in the Cloud ERP market
  • Leading Cloud ERP product
• Weaknesses:
  • Exposed to SMEs, which are vulnerable to economic weakness
• Opportunities:
  • Cloud ERP market has large potential
• Threats:
  • Intensifying competition in the cloud business
  • Potential share dilution from convertible bonds

Investment Rating Guide

• Buy: Share price may exceed 10% over the next 12 months
• Trading Buy: Share price may exceed 15% over the next 3 months, but longer-term outlook remains uncertain
• Neutral: Share price may fall within ±10% over the next 12 months
• Take Profit: Target price has been attained; look to accumulate at lower levels
• Sell: Share price may fall by more than 10% over the next 12 months

Disclaimer

• The report is for information purposes only and not an offer or solicitation to buy/sell securities.
• RHB does not guarantee the accuracy or completeness of the information provided.
• Investors are advised to make their own informed decisions and consider their specific investment objectives and financial position.
• Forward-looking statements are based on assumptions and are subject to risks and uncertainties.
• Confidentiality: The report is strictly confidential and must not be reproduced or disseminated without permission.
• Distribution Restrictions: The report is subject to geographical restrictions and legal compliance.