\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 588 Yonyou Network Technology Co.Ltd(600588) )
Event overview
On March 19, 2022, Yonyou Network Technology Co.Ltd(600588) released the 2021 annual report, and the company achieved an operating revenue of 8.932 billion yuan, an increase of 4.73% year-on-year; The net profit attributable to the owners of the parent company was 708 million yuan, a year-on-year decrease of 28.18%. The net profit attributable to the owners of the parent company after deducting non recurring profits and losses was 405 million yuan, a year-on-year decrease of 55.30%.
Initial results of cloud Transformation: the contract liabilities related to cloud subscription increased significantly (79%), and the ARR of cloud service business reached 1.65 billion yuan. In 2021, the company’s main cloud service and software business revenue reached 8.64 billion yuan, with a year-on-year increase of 15.7%, including a year-on-year decrease of 18.0% in software business revenue, a year-on-year increase of 55.5%, accounting for 61.6% of cloud service and software business revenue, an increase of 15.8 percentage points over the same period of last year, Has become the company’s main source of income.
The growth of revenue is affected by multiple factors such as the stripping of financial business (the revenue of financial services decreased by more than 70% year-on-year, from 1.038 billion yuan to 291 million yuan), the impact of re subscription on the current revenue (the net increase in the liability of subscription contract increased by 374 million), service subcontracting and outsourcing in favor of ecological partners. If the corresponding amount of the above factors is added back, the revenue under the same caliber has achieved double-digit year-on-year growth.
The revenue structure was further improved. The company’s cloud service business arr reached 1.65 billion yuan, and the contract liabilities related to cloud subscription increased by 79.0% year-on-year (from 473 million yuan to 847 million yuan). Superimposed with the ARR brought by the company’s standard product support services (SPS), the proportion of annual recurring revenue in the enterprise’s revenue was further expanded.
Optimistic about the high investment in sales and R & D, and realize the shift from following to leading in technology
Sales expenses increased by 31.7% year-on-year, mainly due to the company’s continuous upgrading of sales organization system, increasing customer coverage and business promotion; R & D expenses increased by 16.2% year-on-year, mainly due to increased investment in product R & D during the reporting period. The high investment in sales and R & D affects the net profit attributable to the parent company in the current period, which we think should be optimistic Yonyou Network Technology Co.Ltd(600588) is in a critical period of rapidly seizing China’s high-end market, and the upgrading of the sales system is imperative. The high-cost introduction of sales and consultants from foreign enterprises represents that Yonyou Network Technology Co.Ltd(600588) is more attractive and competitive. The addition of high-end talents is expected to help Yonyou Network Technology Co.Ltd(600588) quickly seize the market of large and super large enterprises and inject power into the rapid development of enterprises. On the one hand, the high investment in R & D helps Yonyou Network Technology Co.Ltd(600588) quickly improve the product power. On the other hand, the continuous investment in cloud native conforms to the changes of market demand and the development trend of the industry, and the technology has changed from following to leading.
The market of large enterprises continues to break through and is expected to enjoy leading dividends in the future
In the large-scale enterprise market, the company actively seized the historical opportunities of digital intelligence and localization of information innovation, expanded its leading position and achieved a revenue of 58.5% 700 million yuan, a year-on-year increase of 17.0%. Among them, the cloud service business revenue reached 3.735 billion yuan, a year-on-year increase of 45.4%. The amount of large orders of more than 5 million yuan increased by 45% year-on-year, and customers signed more than 100 million contracts, further expanding the company’s leading position in the large enterprise service market.
In recent years, Yonyou Network Technology Co.Ltd(600588) focuses on breaking through large & super large enterprises. These enterprises have complex business processes, high urgency of digital transformation and strong willingness to pay. They are the focus of China’s industrial digitization and belong to the high-end market in the field of digitization. Large & super large enterprises have high requirements for product capability (functional integrity, stability, etc.) and service capability (professional level of sales and consultants, response speed, etc.) and great exercise value Yonyou Network Technology Co.Ltd(600588) aseries of benchmark customers have formed multiple barriers to brands, products and services. Under the background of localization, The substitution of foreign software is expected to accelerate. The 2B software market represented by ERP has the law of high concentration and constant strength of the strong. It is expected to enjoy the leading dividend in the future
Investment advice
The high-end market continues to break through, the income structure is improved, and the cloud transformation has reached an inflection point. According to the company’s annual report, we lowered the company’s revenue forecast of 12.09/15.87 billion yuan in 22-23 years to 10.662133.71/17.109 billion yuan in 22-24 years; Raise the forecast of earnings per share (EPS) of 0.36/0.53 yuan in 22-23 years to 0.45/0.54/0.69 yuan in 22-24 years, corresponding to the closing price of 25.44 yuan / share on March 18, 2022, and PE of 57 / 47 / 37 times respectively, maintaining the “buy” rating of the company.
Risk tips
1) the domestic substitution process is not as expected; 2) The promotion of cloud products is lower than expected; 3) Industry competition intensifies; 4) Macroeconomic downside risks; 5) Market systemic risk.
