\u3000\u3000 Yonyou Network Technology Co.Ltd(600588) (600588)
Event overview
On January 25, 2022, the company announced the landing of non-public offering. The company completed the book entry issuance of fixed increase on January 11, with the issuance price of 31.95 yuan / share, raising the total amount of 5.3 billion yuan.
Fixed growth has been implemented, and a number of giants have been added. We continue to be optimistic about the construction of digital base BiP products
According to the company’s fixed increase announcement, 17 issuance objects were finally determined, with a total of 166 million shares issued, accounting for 4.8% of the total share capital after issuance. The fixed issuance price is 31.95 yuan / share, which is 84.5% of the closing price on January 25, 2022; After deducting the issuance expenses, the company actually raised 5.258 billion yuan.
From the perspective of participants, on the one hand, the major shareholders of the original institutions are still optimistic, such as Wanjia fund, e fund and individual investor Ge Weidong continue to participate; On the other hand, there are many capital giants in the new institutions, such as Hillhouse, Gaoyi, GIC and Morgan Stanley, which are new shareholders. The participation of foreign capital such as Morgan Stanley shows the recognition of the company by global investors.
From the disclosure of the company, the raised funds will be mainly invested in the construction of UFIDA business innovation platform – UFIDA BIP and other projects. We believe that the new products of BiP digital base driven by localization + cloud are the key to lead the development of UFIDA in the next stage: 1) the core driving factor of the growth path of FuPan company is still the product & business model. From ERP to BiP, from traditional software to SAAS and then to digital base, product + business model elements lead the company’s growth logic. 2) in history, such as 2005-2010 years of market penetration, EPR led by product logic, 2013-2015 years of market cloud led by UAP (private cloud +CSP public cloud) logic led, superimposed Internet plus mode to open up imagination, and the market has been driven by SaaS + domestic dual wheel drive since 2018, and the core has changed to YonBip and series new products. 3) At present, it is at the midpoint of the third round of high-level market, the penetration of BiP products is still in progress, and the feasibility of localization large orders continues to be verified. Now, after the fixed increase is implemented, the construction of BiP project will receive stronger financial support. We are optimistic about its accelerated implementation and penetration in the next stage.
The order data supports the strong demand for localization and is optimistic about the continuous breakthrough of large enterprise market in 22 years
In 2021, the localization demand / business opportunities faced by the company continued to be strong. From the public data, the order amount of cloud + software of 2021q1-q3 company was 4.83 billion yuan, a year-on-year increase of 31.9%, higher than the growth rate of cloud + software revenue in the same period. Among them, the order amount of more than 5 million yuan increased by 59.1% year-on-year, further improving the year-on-year growth rate of 37.0% disclosed in H1, highlighting the strong localization demand of large downstream enterprises.
Focus on large-scale & super large enterprise market, and benchmark customers continue to make breakthroughs. In 2021, with the evolution of digital intelligence and localization, UFIDA continues to break through the top customers in the large & super large enterprise market. With the two core products of yonbip and NCC, the company has successively won a number of benchmark customers such as central enterprises, state-owned enterprises and industry-leading benchmark customers, including Huawei, national development and investment group, Aerospace Hi-Tech Holding Group Co.Ltd(000901) group, China Post and China Pingmei Shenma Group, so as to firmly grasp the market opportunities and competitive advantages of large enterprises. On the whole, the company will continue to expand central enterprises and industry leading customers in 2021, continue the trend in 2022, further sign contracts with China Shipbuilding and fuel, and strengthen the product layout and customer expansion of yonbip.
Improve the layered playing method and expand the capacity of small and medium-sized enterprise customers. Facing the customer market of medium-sized enterprises, the company achieved the leading market competitiveness of products with the help of yonsuite and u9cloud, and signed a number of model customers such as Zhonghe Puyuan, Hongji Weiye, Pylon Technologies Co.Ltd(688063) ; Facing the small and micro enterprise market, changjietong’s cloud service business revenue has achieved rapid growth and occupied the leading position in the cloud service market of small and micro enterprises.
Personnel adjustment affects clearing, sales and R & D work together, and business is accelerated
In terms of other financial indicators (based on 2021q1-q3 data), 1) the gross profit margin increased steadily to 57.5%, with a year-on-year increase of 3PCT, judging that the Q4 trend continues. There are two main reasons for judging: one is to peel off the financial business with low gross profit; the other is to increase the proportion of cloud business and improve the comprehensive gross profit margin. It is worth noting that changjietong’s gross profit margin may have a downward trend, mainly due to the increased partner commission rebate policy in the process of public cloud business to promote sales, so as to obtain the market faster. In the medium and long term, the profit margin is also upward. 2) The cost rate is steadily improving. At present, it is still in the overweight period. In 2021q1-q3, the sales expense rate was 25.3%, with a year-on-year increase of 6.1pct, and the management expense rate was 15.0%, with a year-on-year decrease of 0.1pct; The R & D expense rate was 23.3%, with a year-on-year increase of 2.4pct. Among them, the increase of sales expenses is caused by the introduction of high-end sales talents, which complements the sales team for L1 customers; In terms of R & D, if calculated according to the caliber of R & D investment, the R & D investment in the first three quarters was as high as 1.56 billion yuan, a year-on-year increase of 42.2, further strengthening product barriers. 3) Clear out the impact of personnel adjustment and implement the equity incentive plan. As of 2021q3, the total number of employees of the company has reached 20604, an increase of 2522 over the beginning of the year, an increase of 13.9%, including 6452 R & D personnel, an increase of 1163 over the beginning of the year, accounting for 31.3% of the total number of employees. It is judged that the top-down and drastic manpower adjustment and restructuring of the company has been basically completed since 2021. At the same time, the company has also promoted the implementation of the new equity incentive plan, which plays an important role in the retention and incentive of the core team, and the pain of the adjustment period has been cleared.
On the whole, it is judged that the company has come out of the lowest point, and there has been an inflection point breakthrough in the transformation of cloud business. It has passed the most difficult stage of the decline of traditional business + the small contribution of cloud business base. At the time of the implementation of fixed growth, the company firmly grasps the market initiative of large enterprises and is expected to seize more market share and competitive advantage by virtue of yonbip’s advantageous products.
Investment advice
The dark hour has passed, and the transformation of cloud business shows an inflection point breakthrough. Keep the profit forecast unchanged. From 2021 to 2023, the company’s operating revenue was RMB 9.60/12.09/15.87 billion respectively, with a year-on-year increase of 12.6% / 26.0% / 31.3%; It is predicted that the net profit attributable to the parent company in the three years will be RMB 900 / 11.7 / 1.72 billion respectively, with a year-on-year increase of – 9.2% / 30.2% / 47.4% and EPS of RMB 0.27/0.36/0.53 respectively. In terms of valuation, P / OCF valuation method and PS valuation method are adopted respectively. It is estimated that the target market value in 2022 will be RMB 182.6 billion and 181.4 billion respectively, with a space of more than 50%.
Risk tips
1) the risk that the growth of software business is lower than expected; 2) The risk that the promotion of cloud products is lower than expected; 3) Intensified competition in ERP industry; 4) Macroeconomic downside risks.
