News Alert: FY23 preliminary results points to c.17% revenue growth, slightly below expectations
- Revenue is expected to increase by 16.2-17.2% y-o-y in FY23, slightly below market expectations of c.19% growth
- Enterprises remained relatively cautious on IT spending during FY23, leading to slower-than-expected cloud business recovery
- Remain positive on the company’s outlook in FY24, supported by localisation and improving IT spending in China; Maintain BUY
FY23 revenue to grow by c.17% y-o-y; slightly below expectations. Kingdee (268 HK) announced its FY23 preliminary financial results on 5th Jan 2024 after market close, according to an HKEx announcement. Revenue is expected to increase by 16.2-17.2% y-o-y to Rmb5.65bn – Rmb5.70bn in FY23, slightly behind market expectations of c.19% growth due to slower-than-expected cloud business recovery. Kingdee’s cloud subscription annual recurring revenue (ARR) increased by 32.8% y-o-y to Rmb2.85bn in FY23, also below its full year target of Rmb3bn (or 40% y-o-y growth). Net loss is expected to narrow by 36.3-56.8% y-o-y to Rmb170m – Rmb250, better than market expectations of net loss of c.260m, thanks to its stringent cost control measures.
Remain positive on FY24, riding on localisation and improving IT spending. The slower-than-expected revenue growth could impact sentiment negatively in the near term. Enterprises remained relatively cautious on IT spending during FY23, following COVID-19. Despite a slower-than-expected business recovery in FY23, we foresee domestic ERP market growth will accelerate in FY24, driven by localisation and improving IT spending. Kingdee have also started to monetise its CosmicGPT recently, and it is well positioned to benefit from the growing AI trend. In addition, we believe the recent strategic investment from Qatar Investment Authority (QIA) may also help Kingdee in its international expansion. Maintain BUY with TP under review.