UFIDA (600588): NC suspended sales, Shen Zhouyun’s transformation began to accelerate

This report reads: The company stopped selling 杭州桑拿洗浴会所 NC series software for large group companies, and comprehensively promoted the sales of cloud ERP software NC Cloud. In 2019, it will become the year when the company transitions to the cloud.

Investment Highlights: Maintain Overweight rating and raise TP to 39.

35 yuan.

Considering that the company stopped selling NC and focused on selling NC Cloud products, it will bring a rapid increase in the proportion of cloud service revenue. It is expected that the EPS in the next three years will be zero.

35/0.

38/0.

48 yuan, raise the target price to 39.

35 (+8.

24) Yuan, corresponding to the traditional software business in 202022.

52 times PE, cloud services 20 times PS.

The growth rate of the mid-term cloud service in 2019 was slightly higher than expected.

Software business revenue in the first half of the year22.

USD 7.8 billion, an increase of 5%; cloud services revenue excluding finance4.

72 ppm, an increase of 114 in ten years.

6%, exceeding the guidance of 100% growth at the beginning of the year.

Among cloud services revenue, SaaS revenue2.

86 ppm, an increase of 133 in ten years.

6%, the market-focused NC Cloud achieved 59.84 million in revenue in the first half of the year.

Discontinuing the sale of NC series of traditional software and comprehensively promoting the sales of NC Cloud. 2019 will be the year of UFI Cloud’s comprehensive acceleration.

The cloudification of ERP software has become the general trend. The company stopped selling NC series software for large group companies, and comprehensively promoted the sales of cloud ERP software NC Cloud, indicating the company’s determination to turn to the cloud.

It is foreseeable that UFIDA’s cloud service revenue will increase rapidly in 2020, exceeding market expectations.

Higher research and development speed accelerates the development of new cloud ERP products.

Internally, the company actively adjusted its resources. From the semi-annual report, the company’s selling expenses and management expenses have been better controlled. Among them, the selling expenses have seen negative growth.

The company will continue to increase R & D investment in the future. We expect that R & D personnel will continue to expand in 2019 and 2020 to accelerate the development of the company’s cloud products.

Risk Warning: Cloud Business Develops Less Than Expected, Enterprise Management Software Industry Is Intensely Competitive