20211116-招银国际-明源云-00909.HK-Property_policy_bottomed_but_sales_data_still_weak_11页_1mb

CMB International Securities | Equity Research | Company Update Summary

Core Content

Company: Ming Yuan Cloud (909 HK)
Industry: China Software & IT Services
Analyst: Marley Ngan
Rating: BUY
Target Price: HK$35.75 (+32.7% from current price of HK$26.95)
Valuation: Based on 20x FY22E fully diluted P/S
Key Products: CRM Cloud, Construction Cloud, Skyline PaaS, ERP solutions, SaaS product

Main Points

• Property Sector Outlook:

  • The property sector policy has bottomed out in October 2021, but property sales data have not yet rebounded.
  • MYC remains optimistic about the long-term recovery of the property sector.
  • The management is confident in achieving this year's revenue target (ERP +15-20% YoY, SaaS over +50% YoY).
  • There is more uncertainty regarding the FY22E outlook, depending on new land acquisition and delivery pace.

• Product Strategy:

  • MYC focuses on standardized SaaS and Skyline PaaS, which enables third-party IT service providers to develop customized solutions for property customers.
  • CRM Cloud is the core SaaS product, accounting for 39% of FY20 revenue.
  • ARPU improvement is the key growth driver, targeting through AloT, VR, and data analytics.
  • Construction Cloud targets SOEs, as private developers face policy headwinds and SOEs gain market share.
  • ERP solutions are also a significant revenue contributor and are being transitioned to cloud-based models.

• Market Performance:

  • Property sales volume and value declined by 22% and 23% YoY in October 2021, indicating continued weakness.
  • MYC's revenue growth is expected to slow in FY22E, with a projected YoY growth of 27% compared to the consensus of +38%.
  • The company's P/S valuation is currently at 15.1x for FY22E, below the industry mean of 19.7x.

• Financial Highlights:

  • Revenue: Expected to grow from RMB 1,264 mn (FY19) to RMB 3,858 mn (FY23E), with a CAGR of 37% from FY20 to FY23E.
  • Gross Margin: Maintained at around 79-80.5% across the forecast period, with SaaS product margin at 87-91%.
  • Operating Margin: Expected to improve from 9.2% (FY21E) to 17.6% (FY23E).
  • Core Net Profit: Projected to increase from RMB 216 mn (FY19) to RMB 771 mn (FY23E), with a CAGR of 30%.
  • EPS: Expected to rise from RMB 0.15 (FY19) to RMB 0.42 (FY23E), with a CAGR of 30%.

• Valuation Analysis:

  • MYC is currently trading at 1-SD below mean valuation, suggesting a potential buying opportunity.
  • The company's P/S valuation for FY22E is 15.1x, while the industry mean is 19.7x and median is 18.2x.
  • The analyst recommends waiting for clearer signs of improvement in property sales before making a decision.

Key Financial Data

Revenue (RMB mn)

• FY19: 1,264
• FY20: 1,705
• FY21E: 2,328
• FY22E: 2,946
• FY23E: 3,858

YoY Revenue Growth

• FY19: +38%
• FY20: +35%
• FY21E: +36%
• FY22E: +27%
• FY23E: +31%

Core Net Profit (RMB mn)

• FY19: 216
• FY20: 328
• FY21E: 384
• FY22E: 538
• FY23E: 771

Core EPS (RMB)

• FY19: 0.15
• FY20: 0.22
• FY21E: 0.21
• FY22E: 0.29
• FY23E: 0.42

P/S (x)

• FY21E: 15.1
• FY22E: 13.3
• FY23E: 11.5

FCF Margin (%)

• FY21E: 22%
• FY22E: 22%
• FY23E: 22%

Net Margin (%)

• FY19: 17.1%
• FY20: 19.3%
• FY21E: 16.5%
• FY22E: 18.3%
• FY23E: 20.0%

Shareholding Structure

• Mr. Gao (Chairman): 20.50%
• Mr. Chen (VP): 15.40%
• Mr. Jiang (CEO): 9.70%

Market Cap & Performance

• Market Cap (HK$ mn): 53,054
• Avg 3 mths t/o (HK$ mn): 185.90
• 52w High/Low (HK$): 60.67 / 21.80
• Total Issued Shares (mn): 1,969

Share Performance (3 mths)

• Absolute: -8.9%
• Relative: -5.1%

12-mth Price Performance

• Current Price: HK$26.95
• Target Price: HK$35.75
• Performance: -21.1% (6 mths), -12.7% (3 mths), -21.1% (6 mths)

Analyst Certification & Disclaimer

• The analyst certifies that the views expressed accurately reflect personal views and that compensation is not tied to specific views in the report.
• The report is not an offer or solicitation to buy/sell any securities.
• CMBIS does not provide individually tailored investment advice and recommends consulting a professional financial advisor.
• The information is based on publicly available data and is provided on an "AS IS" basis without guarantees.

Conclusion

MYC's key growth drivers are ARPU improvement through new SaaS features and targeting SOEs for Construction Cloud. While property sales data remain weak, the company remains optimistic about long-term recovery. The analyst maintains a BUY rating with an unchanged target price, suggesting that the current valuation may present a good entry point if property sales data improve.