20221028-招银国际-用友网络-600588.SH-Software_localization_adds_uncertainty_to_cloud_strategy_10页_1mb

报告摘要

Yonyou (600588 CH) Company Update Summary

Core Content Overview

Yonyou, a leading Chinese software and IT services company, reported FY3Q22 results with in-line revenue growth of +17% YoY to RMB2,059mn, but experienced a wider net loss of RMB284mn, primarily due to margin erosion and higher operating expenses. The company's cloud revenue growth slowed to +22% YoY, the lowest since its cloud-focus strategy began in 2019, while software revenue saw an unexpected +15% YoY growth to RMB795mn, indicating continued demand from large enterprises, especially state-owned enterprises (SOEs). However, the customization demands from these enterprises are dragging down margins.

Main Points

Revenue Performance:
- In-line growth of +17% YoY to RMB2,059mn.
- Cloud revenue grew +22% YoY to RMB1,247mn, but this was the slowest growth since 2019.
- Software revenue increased +15% YoY to RMB795mn, reversing a declining trend since 2019.
- Cloud revenue accounted for 61% of total revenue in FY3Q22, down from 69% in FY2Q22.
Profitability Issues:
- Gross margin dropped to 49.9%, a decline of -8.2 ppts YoY and -11.3 ppts QoQ.
- Operating loss reached RMB366mn, far exceeding the estimated RMB179mn.
- Net loss was RMB284mn, compared to RMB112mn (CMBI estimate) and RMB128mn (consensus).
- EPS was -RMB0.08, significantly below expectations.
Operational Expansion:
- The company expanded its sales and R&D workforce by +23% YoY, reaching 25,276 employees.
- However, revenue per employee has declined for 6 consecutive quarters, indicating inefficiencies or challenges in scaling.
Valuation and Target Price:
- The target price was raised to RMB23.51 from RMB19.81, based on a higher EV/sales multiple of 6.0x (prior 5.0x).
- The 12-month forward EV/sales is at 6.4x for FY23E, with the stock price currently at RMB24.93.

Key Financial Metrics

Metric	FY20A	FY21A	FY22E	FY23E	FY24E
Revenue (RMB mn)	8,525	8,932	10,390	12,667	15,011
YoY growth (%)	0%	5%	16%	22%	19%
Net profit (RMB mn)	989	708	535	830	1,051
EPS (RMB)	0.30	0.22	0.16	0.24	0.31
YoY growth (%)	-17%	-28%	-28%	55%	26%
EV/sales (x)	9.8	9.5	7.9	6.4	5.3
P/E (x)	82.5	115.2	160.1	103.1	81.5
Net debt to equity	Net cash	Net cash	Net cash	Net cash	Net cash
Net margin (%)	13.9%	7.9%	5.1%	6.6%	7.0%

Strategic Implications

Cloud Migration Uncertainty: The slower growth in cloud revenue compared to the previous quarter and the shift in revenue mix towards software suggest that large enterprises may be reluctant to adopt the cloud model, favoring customized solutions.
Software Localization: The demand for software localization from SOEs is benefiting the top line but not the margins, as customization costs increase.
Operational Costs: Operating expenses rose +22% YoY to RMB1,394mn, contributing to the net loss.
Valuation Adjustments: The target multiple was increased due to the software localization trend, and the cloud demand is expected to solidify post-20th Party Congress.

Shareholding and Performance

Shareholding Structure:
- Mr. Wang (Chairman): 38.9%
- HKSCC: 7.2%
- Mr. Guo (Vice Chairman): 3.7%
Share Performance:
- 1-month: +31.5% (Absolute) / +37.9% (Relative)
- 3-month: +10.1% (Absolute) / +27.9% (Relative)
- 6-month: +37.8% (Absolute) / +42.6% (Relative)

Earnings Revision and Margin Trends

Earnings Revision:
- Net profit for FY22E was revised down by 22% to RMB535mn.
- EPS was revised down by 22% to RMB0.16.
Margin Trends:
- Gross margin dropped to 58.8% in FY22E, a -210 bps decrease from FY21A.
- Operating margin fell to 4.5%, a -165 bps decrease from FY21A.
- Net margin was 5.1% in FY22E, a -147 bps decrease from FY21A.

Valuation Comparison

Company	Ticker	Rating	Market Cap (US$ mn)	Price (LC)	TP (LC)	EV/sales (x) FY22E	EV/sales (x) FY23E	Sales CAGR FY21-24E	EPS CAGR FY21-24E
Yonyou	600588 CH	HOLD	11,842	24.93	23.51	7.9	6.4	19%	12%
Kingdee	268 HK	BUY	5,339	12.06	23.83	7.3	5.9	19%	n.a.
Kingsoft Office	688111 CH	NR	17,245	270.30	N/A	29.4	22.3	28%	29%
SAP	SAP US	NR	120,099	97.76	N/A	4.3	4.0	11%	15%
Intuit	INTU US	NR	119,623	424.39	N/A	9.8	8.5	29%	28%
Xero	XRO AU	NR	7,429	76.74	N/A	11.9	9.2	-7%	2%
Workday	WDAY US	NR	39,611	154.73	N/A	7.4	6.1	26%	19%
ServiceNow	NOW US	NR	74,015	366.41	N/A	9.9	8.1	29%	31%
Salesforce	CRM US	NR	159,910	159.91	N/A	6.1	5.2	19%	20%

Conclusion

Rating: HOLD
Target Price: RMB23.51
Valuation: The EV/sales multiple was raised to 6.0x for FY23E, reflecting the software localization trend and solidified demand for Yonyou's ERP solutions.
Key Challenges: Margin erosion, slow cloud growth, and increased customization demands are the main challenges facing Yonyou.
Strategic Focus: The company is strategically expanding its workforce to meet the software localization needs, but this may further impact margins.

Financial Summary Highlights

Cash Flow:
- Net cash from operating increased to RMB2,619mn in FY24E.
- Net cash from financing was RMB-33mn in FY24E.
- Cash at the end of the year reached RMB11,463mn in FY24E.
Balance Sheet:
- Total assets are projected to increase to RMB30,065mn in FY24E.
- Total liabilities are expected to reach RMB14,342mn in FY24E.
- Total equity is projected to be RMB14,847mn in FY24E.
Key Notes:
- Software localization is a key driver for revenue growth.
- Cloud migration is slower than expected, with SOEs being a major client.
- Operating expenses are a significant factor in the margin contraction.
- Earnings estimates have been revised downward due to lower margins and higher costs.

Outlook

Cloud Strategy: The cloud strategy is facing uncertainty, with slow growth and margin pressures.
Software Demand: Software revenue is growing, but customization demands are a drag on margins.
Valuation: The target price has been raised, reflecting the software localization trend and ERP demand.
Operational Efficiency: The decline in revenue per employee over the last 6 quarters indicates challenges in scaling.