Equities Hong Kong/China Company Update Company Report
Yonyou Software (600588.CH) 13 July 2015
China / Computer
Fast-growing Enterprise Internet Business
Company announcement:
BUY
1. Intend to set up an Internet company to provide Customer
Resources Management (“CRM”), social and collaborative
Share Price 6M TP
services to corporate clients.
2. Wholly-owned subsidiary “Yonyou Up” solely adopted the Rmb44.05 Rmb62.00
distribution model after optimizing its existing direct
sales-distribution business model.
Jiang Guoping
1. Rapidly expanding enterprise Internet business: 021-22169167
[email protected]The Internet services company proposed to be set up by Yonyou
Software is its first enterprise Internet company that provides CRM,
Xue Liang
social and collaborative services, which will consolidate the
021-22167311
resources of “Yonyou Up”, Social-CRM and Internet-related
[email protected]marketing business. The U9 business (including PLM) of “Yonyou
Up” will also be integrated into its high-end business to achieve Contact Person
synergies in resource integration. This move not only meets
customers’ imminent Internetization need for CRM, social and Wei Shugen
021-22167336
collaborative services, but also allows its Internet business to run
[email protected]independently from traditional software business, proving Yonyou
Software is shifting apace from traditional software business to
enterprise Internet business.
Latest Key Data
2. Strategic shift of traditional software business: FF no of shares (100m) 14.06
Overall business strategy of “Yonyou Up” is revamped: “focus on U8 FF market cap (Rmb100m) 619.21
and 100% distribution (upgraded partners), enhance products (via
Internetization) and efficiency”, and the 100% distribution model will
be adopted. The profits sharing with partners and enhanced product Performance (%)
distribution help expand the company’s business circle and scope. 1M 3M 12M
The focus on software products increases the proportion of Absolute (35.87) 18.94 267.42
high-margin products sales and support services to total revenue, Relative (12.84) 24.41 176.24
thus boosting overall profit margins. Moreover, the distribution model
will ensure product quality and improve customer satisfaction, further
optimizing the operating environment. The new strategic focus of
software business on “management and efficiency improvement” and
its more than 2,000,000 customers will help the company implement
the enterprise Internet strategy.
Enterprise Internet forerunner:
Yonyou Software has the most solid clientele and prominent
advantage for enterprise Internetization. It also has clear
development strategy for and made big stride in the transformation of
traditional software business, enterprise Internet business promotion
and Internet banking business. We are optimistic the company will
become a leader in the enterprise Internet sector.
China Everbright Research Limited Please read the analysts and company disclosure and the disclaimer in the last page
CHINA / COMPUTER
Recommendation:
We expect the company’s 2015-17E EPS to be Rmb0.46, Rmb0.60 and
Rmb0.80 respectively. Current price corresponds to 2015-17E PE of 95, 73 and
55 times. Maintain Buy at target price of Rmb62.00.
Risk factor:
Worse-than-expected development of new business and business
transformation.
Earnings forecast and valuation
Year-end Dec 2013 2014 2015E 2016E 2017E
Turnover (Rmb m) 4,363 4,374 4,951 5,831 7,055
Growth (%) 3.01 0.26 13.19 17.76 21.00
Net profit (Rmb m) 548 550 652 845 1,131
Growth (%) 44.34 0.43 18.42 29.66 33.83
EPS (Rmb) 0.39 0.39 0.46 0.60 0.80
ROE (attributable to parent, diluted) (%) 16.98 13.80 15.20 17.62 20.59
PE (x) 113 113 95 73 55
Source: CES
China Everbright Research Limited Please read the analysts and company disclosure and the disclaimer in the last page 2
China Everbright Research Limited Rating System
Buy Expected to outperform the benchmark index by >15% over the next six months
Accumulate Expected to outperform the benchmark index by 5 - 15% over the next six months
Hold Expected to outperform or underperform the benchmark index by <5% over the next six months
Reduce Expected to underperform the benchmark index by 5 - 15% over the next six months
Sell Expected to underperform the benchmark index by >15% over the next six months
Analyst Certification
The research analyst(s) primarily responsible for the preparation of this report hereby certify that –
(1) All of the views expressed in this report accurately reflect his or her or their personal views about the subject
company or companies and its/theirs securities;
(2) No part of his or her or their compensation was/were, is/are or will be directly or indirectly, related to the specific
recommendations or views expressed in this report or any specific investment banking function;
(3) He/she/they are not directly supervised by, and do not directly report to, investment banking functions;
(4) He/she/they has/have not breach the quiet period restriction of dealing in the securities covered in this report;
(5) He/she/they is/are not an officer and do(es) not hold any directorship in the company or companies this report
covered.
Disclosure
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not have financial interests (including stock holding) that equal 1% or more of the market capitalization of the company
under review at the date this report is published; does not have investment banking relationship with the company under
review within the past 12 months; and does not have market-making activities in the stock. None of our staff is an officer
of the company.
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