YONYOU(600588)：TAKES TIME TO BUILD THE CLOUD PLATFORM

Yonyou reported better than expected FY2Q22 with steady revenue growth of +15% YoY to RMB2.26bn. Cloud revenue grew +57% YoY to RMB1.55bn.
However, we observed ARR/ contract liabilities growth have slowed to +2%/ +11% HoH. These may suggest a decline in renewal rate and add pressure to Yonyou’s cloud subscription business. Meanwhile, Yonyou increased R&D in cloud platform YonBIP targeting large-sized enterprises. R&D was up +38% YoY, as well as R&D capitalization rate. We think earnings quality will be distorted during the YonBIP ramp up phase. Maintain HOLD.
FY2Q22 beat on lower opex ratio. Yonyou delivered steady top-line growth at +15% YoY to RMB2,258mn, beating our/ consensus estimates by 9%/2%.
Cloud revenue was RMB1,551mn (+57% YoY, +107% QoQ), accounting for 69% of total. Operating profit was RMB89mn (+34% YoY), lower opex ratio at 57.3% (-2.7 pcts) has offset decline in GPM (-2.1 pcts YoY to 61.2%). Net profit was RMB137mn (-40% YoY).
ARR/ contract liabilities HoH growth slowdown adds uncertainty to cloud outlook. In FY1H22, Yonyou cloud revenue grew +53% YoY to RMB2,299mn. In terms of customer mix, 67/ 18% of cloud revenue came from large-sized/ SME enterprises. ARR was RMB1,680mn (+102% YoY, +2% HoH). Cloud contract liabilities was RMB1,760mn (+42% YoY, +11% HoH).
These cloud metrics look good on a YoY basis but HoH growth rates slowed.
These may suggest a decline in renewal rate and we are concerned that Yonyou’s subscription revenue (mostly derived from SME) growth may slow down.
Increasing R&D (and capitalization rate) related to YonBIP platform for large-size enterprises. In FY1H22, Yonyou increased R&D expenditure by 38% YoY to RMB1.32bn as the Company continues to develop cloud-native YonBIP platform for large-sized enterprises. R&D capitalization rate also rose to 26.4% (vs. 21.9% in FY1H21). We think earnings quality will be distorted in the short term during YonBIP ramp-up stage.
Maintain HOLD. We raised FY22-24E net profit by 1-5% to reflect better than expected opex control. Maintain HOLD with new target price of RMB19.81 (prior RMB19.58), based on unchanged 5.0x FY23E EV/sales.
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   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。