AI-native revenue ramping up

Kingdee (268 HK) AI-nativerevenue ramping up Target PriceHK$15.10Up/Downside83.9%Current PriceHK$8.21 Kingdee reported in-line 1H26 results. Revenue rose 13.6% YoY to RMB3.63bn(1H25: +11.2% YoY), in line with both our forecast and Bloomberg consensus.Net profit attributable to ordinary shareholders was RMB54.5mn (1H25: loss ofRMB97.7mn), within the RMB40mn-60mn range indicated in the profit alertdated 7 Jul. Management highlighted strong momentum in its AI-native productsin 1H26: 1) AI-native product revenue reached RMB296mn, up 189% YoY; and2) contract value of AI-native products reached RMB605mn, up 159% YoY.Leveraging its existing customer base and strengths in enterprise data andworkflow, Kingdee’s AI-native products are delivering measurable value tocustomers, with monetization ramping up rapidly. We believe this could drive areacceleration in revenue growth and support a valuation rerating. We forecastKingdee’s revenue growth to accelerate to 15.8% YoY in 2026E (2025: 12.0%),2% ahead of consensus. We maintain our TP at HK$15.1, based on 5.2x 2026EEV/sales, in line with its three-year mean (previously: 5.4x). We remain positiveon Kingdee, as accelerating AI monetization and a solid margin expansiontrajectory should support both earnings growth and valuation rerating. BUY. China Software & IT Services Saiyi HE, CFA(852) 3916 1739hesaiyi@cmbi.com.hk Ye TAO, CFA(852) 3850 5226franktao@cmbi.com.hk Wentao LU, CFAluwentao@cmbi.com.hk Shuyin GUO(852) 3916 3716guoshuyin@cmbi.com.hk Cloud revenue contributioncontinued to increase.In 1H26, Kingdee’scloud revenue grew 16.6% YoY to RMB3.1bn, accounting for 86.0% of totalrevenue (+2.3ppts YoY). Subscription ARR rose 18.3% YoY to RMB4.4bn(1H25: +18.5% YoY), supported by growth in new signings driven byKingdee AI Suite and robust demand from customers in selected industries.NetdollarretentionforCloudConstellation/Galaxy/Stellarwas101%/96%/94% in 1H26, compared with 108%/94%/93% in 1H25.AI-native product revenue is ramping up rapidly.Management Stock Data highlighted strong momentum in its AI-native products, comprising Lingeeand Kingdee AI Suite.In 1H26: 1) AI-native product revenue reachedRMB296mn, up 189% YoY; and 2) contract value reached RMB605mn, up159% YoY and 47% HoH. Since its launch on 20 May, Lingee has signed26customers and deployed more than 40 agents across key businessfunctions, including finance, supply chain, procurement and manufacturing.Management targets to sign 10k customers for Lingee by year-end. Operating efficiency continued to improve.In 1H26,Kingdee’s GPMimprovedby 2.1ppts YoY to 67.7%,mainly driven by the increasedcontribution from subscription revenue with a higher gross profit margin, aswellas the YoY improvement in GPM of implementation,consultingmaintenance services and others.Operating loss margin narrowed to 1.4%in 1H26 from 9.1% in 1H25, supported by GPM expansion and improvedoperating efficiency.Management reiterated its 2026 guidance for:1)double-digit YoY group revenue growth, with AI-native product revenueexceeding RMB1bn; 2) adjusted NPM of 7%, versus 3.3% in 2025; and 3)OCF growth of over 20% YoY. Source: FactSet Changes in forecasts and target price.Post results, we raise our 2026-2028E revenue forecasts by 2-8%. Our revised revenue forecasts are now2% above consensus in each of2026E-2028E. We maintain our TP atHK$15.1, based on 5.2x 2026E EV/sales, in line with Kingdee’s three-yearmean (previously: 5.4x). Changesin forecast and valuation Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, in whole or in part, certifies thatwith respect to the securities or issuer that the analyst covered in this report: (1) allof the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this researchreport within 30 calendar days prior to the date of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3)serve as an officer of any of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies covered in this report. CMBIGM RatingsBUY : Stock with potential return of over 15% over next 12 monthsHOLD: Stock with potentialreturn of +15% to-10% over next 12 monthsSELL: Stock with potential loss of over 10% over next 12 monthsNOT RATED: Stock is not rated byCMBIGM :Industry expected to outperform the relevant broad market benchmark overnext 12 months:Indus