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用友网络(600588) Youyou reported in-line revenue growth of +17% YoY to RMB2.06bn in FY3Q22.However, net loss widened unexpectedly to RMB284mn mainly due to marginerosion. Yonyou delivered slowest cloud revenue growth of +22% YoY since thecompany adopted cloud-focus strategy in 2019. Meanwhile, license-basedsoftware business from large-sized enterprises was up +19% YoY. This couldimply large-sized enterprises are less willing to adopt cloud model and increasingcustomization may drag Yonyou’s margin further. Maintain HOLD. FY3Q22 miss on margin. Yonyou delivered in-line revenue growth of +17%YoY to RMB2,059mn. Net loss widened to RMB284mn (vs. -RMB88mn in3Q21) mainly dragged by 1) GPM erosion (-8.2 ppts YoY to 49.9%) and 2)higher opex (+22% YoY to RMB1,394mn). Company attributed the bottomline miss to the strategic expansion in sales/R&D workforce given increasingsoftware localization demand. Yonyou has 25,276 staff (+23% YoY) in 3Q22.However, we observed that revenue generated per employee has declined for6 consecutive quarters. Revenue mix change suggest uncertainty in cloud migration strategy.Yonyou delivered the slowest cloud revenue growth of +22% YoY toRMB1,247mn in 3Q22 (vs. +57% YoY in 2Q22) since the company launchedcloud-focus strategy in 2019. Meanwhile, revenue from Software recordedunexpected YoY growth of +15% YoY to RMB795mn (was in declining trendsince 2019) as revenue from large-sized enterprise was up +19% YoY. Cloudrevenue contribution thus dropped to 61% in 3Q22 (vs. 69% in 2Q22). Thiscould imply large-sized enterprises are unwilling to adopt cloud model. Software localization demand from SOEs benefits top-line but notmargin. In FY3Q22, Yonyou recorded -8.2 ppts YoY in GPM. We believeXinchuang demand from large-sized enterprises (mostly SOEs) will benefitYonyou’s top line growth. However, as these SOEs have higher requirementin software customization, a continue change in revenue mix will likely dragYonyou’s margin further. According to management, 95% of the sizable orderscame from SOEs in 3Q22. Maintain HOLD. We cut FY22/23E net profit by 22/13% mainly to reflect alower margin. Maintain HOLD with new target price of RMB23.51 (priorRMB19.81), based on higher 6.0x (prior 5.0x) FY23E EV/sales. We raised ourtarget multiple considering the software localization trend and hence demandfor Yonyou’s ERP is solidified after the 20th Party Congress.
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（以下内容从招银国际《Software localization adds uncertainty to cloud strategy》研报附件原文摘录）用友网络(600588) Youyou reported in-line revenue growth of +17% YoY to RMB2.06bn in FY3Q22.However, net loss widened unexpectedly to RMB284mn mainly due to marginerosion. Yonyou delivered slowest cloud revenue growth of +22% YoY since thecompany adopted cloud-focus strategy in 2019. Meanwhile, license-basedsoftware business from large-sized enterprises was up +19% YoY. This couldimply large-sized enterprises are less willing to adopt cloud model and increasingcustomization may drag Yonyou’s margin further. Maintain HOLD. FY3Q22 miss on margin. Yonyou delivered in-line revenue growth of +17%YoY to RMB2,059mn. Net loss widened to RMB284mn (vs. -RMB88mn in3Q21) mainly dragged by 1) GPM erosion (-8.2 ppts YoY to 49.9%) and 2)higher opex (+22% YoY to RMB1,394mn). Company attributed the bottomline miss to the strategic expansion in sales/R&D workforce given increasingsoftware localization demand. Yonyou has 25,276 staff (+23% YoY) in 3Q22.However, we observed that revenue generated per employee has declined for6 consecutive quarters. Revenue mix change suggest uncertainty in cloud migration strategy.Yonyou delivered the slowest cloud revenue growth of +22% YoY toRMB1,247mn in 3Q22 (vs. +57% YoY in 2Q22) since the company launchedcloud-focus strategy in 2019. Meanwhile, revenue from Software recordedunexpected YoY growth of +15% YoY to RMB795mn (was in declining trendsince 2019) as revenue from large-sized enterprise was up +19% YoY. Cloudrevenue contribution thus dropped to 61% in 3Q22 (vs. 69% in 2Q22). Thiscould imply large-sized enterprises are unwilling to adopt cloud model. Software localization demand from SOEs benefits top-line but notmargin. In FY3Q22, Yonyou recorded -8.2 ppts YoY in GPM. We believeXinchuang demand from large-sized enterprises (mostly SOEs) will benefitYonyou’s top line growth. However, as these SOEs have higher requirementin software customization, a continue change in revenue mix will likely dragYonyou’s margin further. According to management, 95% of the sizable orderscame from SOEs in 3Q22. Maintain HOLD. We cut FY22/23E net profit by 22/13% mainly to reflect alower margin. Maintain HOLD with new target price of RMB23.51 (priorRMB19.81), based on higher 6.0x (prior 5.0x) FY23E EV/sales. We raised ourtarget multiple considering the software localization trend and hence demandfor Yonyou’s ERP is solidified after the 20th Party Congress.
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