News Alert: FY23 preliminary results points to 6% increase in revenue, below market expectations
- FY23 revenue is expected to increase by c.6% y-o-y, below market expectations of c.12%
- Implied 4Q23 revenue growth was 11%, improving from 2% in 9M23, below expectations due to lower-than-expected revenue from government segment
- Expect business growth to accelerate in FY24, supported by the recently launched YonGPT and a more effective sales organisation
Implied 4Q23 revenue growth improved to 11%, but slower than market expectations. Yonyou (600588 CH) issued its FY23 preliminary financial results on 26 Feb 2024 after market close. Revenue is expected to grow by c.6% y-o-y to Rmb9,725m – 9,820m in FY23, below market expectations of c.12% increase. The implied 4Q23 revenue growth was 11%, improving from 2% in 9M23 post sales reorganisation, but slower than market expectation of 20% growth due to lowered-than-expected revenue from the government segment. FY23 net loss is expected to be Rmb880m – 930m (compared to net profit of 219m in FY22), also below market expectations of a profit of 200m, due to slower-than-expected revenue growth, and higher-than-expected selling and R&D expenses.
Revenue growth to accelerate in FY24 from clean base. Expect short-term negative share price reaction as FY23 revenue growth was below market expectation. However, we expect the company will resume rapid growth in FY24, as the negatives from reorganisation have been fully reflected in FY23. Total value of signed contract increased by 17% y-o-y in FY23, with the large enterprise segment (contract amount higher than Rmb10m) growing by more than 70%. The company also revealed that its newly launched YonGPT can bring 20% uplift in pricing. We remain optimistic on Yonyou’s growth prospects, as the company benefits from enterprise digitalisation and software localisation in China. We maintain a BUY rating with TP under review.