Credit Suisse lowers the target price for KINGDEE INT'L to 18.85 yuan, expects to benefit from AI, reiterates it as the top choice among Chinese software stocks

Credit Suisse published a research report indicating that Kingdee International (00268.HK) is expected to see revenue and net profit growth of 13% and 152% respectively in the second half of 2025, in line with expectations. Software as a Service (SaaS) revenue grew by 21% last year, accounting for 51% of total revenue, driving an improvement in gross margin and operational leverage, achieving breakeven. The management's goal is for AI Suite revenue to exceed RMB 1 billion this year (accounting for 12% of revenue), and to use token consumption as an internal key performance indicator, aiming for 70% of new code to be generated by AI. Driven by SaaS and AI growth, management expects double-digit revenue growth this year, with net profit margin doubling to about 7%.

The firm noted that Kingdee's stock price has fallen 26% year-to-date, mainly due to market concerns about AI disrupting the industry. However, the firm believes that Kingdee will benefit from AI rather than being replaced, for several reasons: 1) Enterprise Resource Planning (ERP) is a system that records key business process data of enterprises, which is difficult to replace with AI; 2) Kingdee has accumulated a large amount of proprietary data and industry expertise over the past 30 years, which cannot be encompassed by AI models; 3) Its proactive embrace of AI strategies will put it ahead of competitors. The firm’s net profit forecasts for Kingdee over the next two years are 22% and 63% higher than market consensus, reaffirming it as the preferred choice among Chinese software stocks.

Credit Suisse lowered the group's target price from HKD 22.54 to HKD 18.85; rating "Buy."