"Big Banks" Bank of America Securities: The top picks for Chinese software are Kingdee, MEITU, and Kingsoft Office

Bank of America Securities published a report indicating that the stock prices of Chinese software companies covered by the bank are expected to rise by an average of 16% by 2025, underperforming the MSCI China Index's increase of 23%. Looking ahead to 2026, the bank holds a cautiously optimistic view on software demand prospects, as the acceleration of AI monetization and the trend of software import substitution will coexist with weak demand across multiple vertical industries.

Overall, the bank forecasts that the revenue of the Chinese software and IT services industry will grow by 12% year-on-year in 2026, down from a forecasted 13% growth in 2025. After lowering the revenue forecasts for 2025-2026 by about 2%, the average year-on-year revenue growth for the covered software companies is expected to accelerate to 14% in 2026, compared to 7% in 2025.

The bank holds a selectively positive view on companies in the enterprise resource planning (ERP), photo editing software, and office software sectors, as these targets have higher growth visibility under the SaaS model and AI-driven trends; however, it remains cautious about cybersecurity and real estate software due to weak demand. Preferred stocks include KINGDEE INT'L (00268.HK), MEITU (01357.HK), and Kingsoft Office (688111.SH), all rated "Buy." Target prices are detailed in another table