Cloud transformation process: UFIDA cloud revenue is growing rapidly, and Kingdee subscriptions account for a higher proportion
In 2021, UFIDA and Kingdee cloud service revenue accounted for 60% and 65% respectively, and the cloud process went hand in hand. From 2017 to 2021, the service revenue CAGR of UFIDA and Kingdee cloud were 90% and 48% respectively, and the revenue growth of UFIDA cloud was faster. In terms of transformation effectiveness, taking subscription revenue as the main indicator, in 2021, the subscription revenue of UFIDA and Kingdee were 1.65 billion yuan and 1.57 billion yuan respectively, accounting for 31% and 57% of cloud revenue respectively, and the contract liabilities of cloud subscription were 850 million yuan and 1.36 billion yuan respectively, accounting for 54% and 79% of the total contract liabilities respectively. The subscription proportion of Kingdee cloud was higher. We believe that this is related to the customized demand of the customer markets of both sides and the stage of cloud transformation. In the long run, the rise in the proportion of subscriptions will be a common trend.
Market status: positive competition affects gross profit, and the long-term market space is still broad
In 2021, UFIDA's cloud revenue in large and medium-sized enterprises accounted for 70% and 17% respectively, with growth rates of 45% and 127% respectively; The cloud revenue of Kingdee's large and medium-sized enterprises accounted for 14% and about 80% respectively, with a growth rate of 103% and about 40% respectively. With UFIDA accelerating to sink into the medium-sized market, Kingdee has increased investment in the large enterprise market, and the market competition situation may continue. From 2019 to 2021, UFIDA's gross profit margin decreased by about 4 percentage points and Kingdee's gross profit margin decreased by more than 15 percentage points. At the same time, Kingdee invested more in expenses, and the long-term sales + R & D expense rate remained about 70% (UFIDA average about 38%). Thus, from 2017 to 2021, Kingdee's revenue CAGR reached 16%, and UFIDA cloud + soft revenue CAGR was 12% in the same period. The difference of competitive strategy may be caused by the different customer demand, price sensitivity and other factors in the two markets. Looking forward to the future, under the tide of digital intelligence and localization, there is still a wide space for the improvement of the leading market share of China's enterprise service market, and "occupying the market" may still be one of its main strategic choices.
Strategic planning: BiP or EBC emphasize platform ecology and industrial interconnection
The future direction of ERP, whether UFIDA's BiP (business innovation platform) or Kingdee's EBC (enterprise business capability), emphasizes platform and ecological construction. Its goal is to be an ecological center in the era of industrial Internet. Its core value is (1) data value: integrate upstream and downstream of the industrial chain, share industrial data and improve the value of the industrial chain. (2) Ecological value: with the help of the products of developer partners in the ecology, we can better serve customers and expand the value of platform components. Since 2020, the two sides have begun to increase investment in PAAS platform. At present, the proportion of revenue generated by the platform strategy is not high in the initial stage of promotion, and ecological competition will be the main direction in the future.
Investment advice
Under the tide of digital intelligence and localization, China's enterprise service market is expected to have a high boom. Among them, Yonyou Network Technology Co.Ltd(600588) and Kingdee International and other enterprise service manufacturers increase investment and seize the opportunity of the times, and the operating revenue is expected to continue to grow. It is suggested to focus on Yonyou Network Technology Co.Ltd(600588) , Kingdee International, Guangzhou Sie Consulting Co.Ltd(300687) , Digiwin Software Co.Ltd(300378) , etc.
Risk tips
Macro economy affects downstream demand, market competition intensifies, and product innovation is less than expected
