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用友网络(600588)Yonyou announced preliminary FY22 net profit of RMB200-220mn (-68.9-71.7%YoY). The weakness was attributable to COVID resurgence and FY4Q22 and higherR&D spending. While Yonyou’s business is slowly recovering in FY23E, we remaincautious on its cloud migration progress as its large enterprise customers (68% ofrevenue) are less willing to adopt standardized cloud model. Customization wouldresult in higher R&D and thus limiting business scalability and margin upside fromcloud migration. Yonyou preliminary FY22 missed on COVID-resurgence and higher R&Dexpenses. Yonyou announced FY22 preliminary net profit ranged fromRMB200-220mn (down 68.9-71.7% YoY), missed consensus estimate ofRMB505mn. The was attributable to 1) COVID resurgence in FY4Q22 and 4Qusually accounts for 45% of full-year revenue 2) higher R&D and 3) FY21recorded one-off disposal gain of RMB214mn. FY22 core revenue (software +cloud) delivered YoY increase but the growth rate was lower than that in FY21(+16% YoY). We think the FY4Q22 top-line weakness is largely anticipated butthe R&D surge is not. Business slowly recovering in Jan, Yonyou’s subsidiary Chanjet targets30% YoY top-line growth in FY23E. Yonyou’s HK-listed subsidiary Chanjet(1588 HK) also announced FY22 profit warning. Yonyou’s business targetingsmall/ micro enterprises is operated through Chanjet (Yonyou owns 61.85%stake). Chanjet FY22 revenue was up 12-18% YoY while SaaS subscriptionrevenue grew +45% YoY. Implied FY4Q22 revenue was down 18% YoY toRMB180mn (vs. +34% YoY in FY9M22). Management hosted a conference calland commented that business is slowly recovering since Jan 2023. Chanjettargets to achieve +30% YoY in top-line growth and to break-even in FY23E.This suggested RMB883mn revenue contribution by small/ micro enterprises toYonyou, missed our prior forecast of RMB1.1bn. Customization for large-enterprises adds margin pressure. We keep ourview that Yonyou’s cloud migration path is tough with it large enterprise-focusedstrategy (68% of revenue) as these customers (mostly SOEs) are less willing toadopt a standardized cloud model. The demand for customization would resultin extra IT services work. This is in-line with our observation that Yonyou hasincreased its workforce by 4,000 people (+20% YoY) to over 25,000 even inFY22. Also, since the company launched its cloud-focused strategy in 2019, 1)revenue/ operating profit generated per employee has been decreasing (fig.5-6) and 2) R&D capitalization rate was up from about 20% to 35%. Maintain HOLD. We cut FY22-24E revenue by 5-6% and derived new targetprice of RMB22.27 (prior RMB23.51), based on unchanged 6.0x FY23EEV/sales.
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（以下内容从招银国际《Distressed margin with non-standardized cloud》研报附件原文摘录）用友网络(600588)Yonyou announced preliminary FY22 net profit of RMB200-220mn (-68.9-71.7%YoY). The weakness was attributable to COVID resurgence and FY4Q22 and higherR&D spending. While Yonyou’s business is slowly recovering in FY23E, we remaincautious on its cloud migration progress as its large enterprise customers (68% ofrevenue) are less willing to adopt standardized cloud model. Customization wouldresult in higher R&D and thus limiting business scalability and margin upside fromcloud migration. Yonyou preliminary FY22 missed on COVID-resurgence and higher R&Dexpenses. Yonyou announced FY22 preliminary net profit ranged fromRMB200-220mn (down 68.9-71.7% YoY), missed consensus estimate ofRMB505mn. The was attributable to 1) COVID resurgence in FY4Q22 and 4Qusually accounts for 45% of full-year revenue 2) higher R&D and 3) FY21recorded one-off disposal gain of RMB214mn. FY22 core revenue (software +cloud) delivered YoY increase but the growth rate was lower than that in FY21(+16% YoY). We think the FY4Q22 top-line weakness is largely anticipated butthe R&D surge is not. Business slowly recovering in Jan, Yonyou’s subsidiary Chanjet targets30% YoY top-line growth in FY23E. Yonyou’s HK-listed subsidiary Chanjet(1588 HK) also announced FY22 profit warning. Yonyou’s business targetingsmall/ micro enterprises is operated through Chanjet (Yonyou owns 61.85%stake). Chanjet FY22 revenue was up 12-18% YoY while SaaS subscriptionrevenue grew +45% YoY. Implied FY4Q22 revenue was down 18% YoY toRMB180mn (vs. +34% YoY in FY9M22). Management hosted a conference calland commented that business is slowly recovering since Jan 2023. Chanjettargets to achieve +30% YoY in top-line growth and to break-even in FY23E.This suggested RMB883mn revenue contribution by small/ micro enterprises toYonyou, missed our prior forecast of RMB1.1bn. Customization for large-enterprises adds margin pressure. We keep ourview that Yonyou’s cloud migration path is tough with it large enterprise-focusedstrategy (68% of revenue) as these customers (mostly SOEs) are less willing toadopt a standardized cloud model. The demand for customization would resultin extra IT services work. This is in-line with our observation that Yonyou hasincreased its workforce by 4,000 people (+20% YoY) to over 25,000 even inFY22. Also, since the company launched its cloud-focused strategy in 2019, 1)revenue/ operating profit generated per employee has been decreasing (fig.5-6) and 2) R&D capitalization rate was up from about 20% to 35%. Maintain HOLD. We cut FY22-24E revenue by 5-6% and derived new targetprice of RMB22.27 (prior RMB23.51), based on unchanged 6.0x FY23EEV/sales.
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