At present, the digitalization trend of domestic enterprises is booming, and cloud access has become the preferred solution for enterprises, while the demand for digital security has led to a wave of domestic substitution. Under this opportunity, the domestic ERP industry has embraced the dual opportunities of digitalization and localization, and its revenue has also grown. , the industry leader UF Network is one of the best.
On March 24, UFIDA released its 2022 annual report. In 2022, the company will achieve revenue of 9.26 billion yuan, a year-on-year increase of 3.7%; net profit attributable to shareholders of listed companies will be 219 million yuan, a year-on-year decrease of 69%.
Source: UFIDA 2022 Annual Report
Although the performance of UFIDA in 2022 is slightly under pressure, the market is still optimistic about its development. Huaan Securities, Zheshang Securities, Huaxi Securities, Soochow Securities and other institutions gave UFIDA a "buy" rating. In addition, Ping An Securities stated that as the company's strategic investment and business structure upgrades appear in 2023, UFIDA's performance will grow rapidly, and it maintains its "overweight" rating.
So, combined with this performance, where does UFIDA's confidence to continue its upward development come from?
Steady growth in revenue and outstanding performance in the cloud service business
UFIDA's business segment is mainly divided into cloud service business and software business. Among them, the cloud service business is the main driving force for UFIDA to achieve steady revenue growth. In 2022, the cloud service business will realize revenue of 6.35 billion yuan, a year-on-year increase of 19.4%, accounting for 69.0% of the company's cloud and software revenue.
The growth of the cloud service business has benefited from the company's continuous strategy of upgrading the high-quality business income structure and fully implementing the subscription-first strategy. During the reporting period, cloud contract liabilities were 1.92 billion yuan, a year-on-year increase of 21.5%; subscription contract liabilities were 1.32 billion yuan , a year-on-year increase of 55.8%; cloud service ARR was 2.04 billion yuan, a year-on-year increase of 23.8%.
Source: UFIDA public account
In terms of software business, it continued to shrink strategically, achieving revenue of 2.85 billion yuan, a year-on-year decrease of 14.2%.
In addition, due to the impact of increased strategic investment and the sluggish economic environment, UFIDA's net profit will decline in 2022. However, the Q4 profit achieved a relatively large increase. According to the report, UFIDA’s Q4 net profit attributable to the parent was 759 million yuan, a year-on-year increase of 30.62%; the net profit not attributable to the parent was 686 million yuan, a year-on-year increase of 17.79%.
Profit growth is mainly due to the characteristics of customer groups and long project cycles, and the seasonality of software industry revenue. UFIDA's revenue and profits are concentrated in the fourth quarter.
It is worth noting that due to the impact of the epidemic in Q4 of 2022, the negotiation and signing of some UFIDA businesses will be delayed, and project implementation and delivery and customer acceptance will lag behind. improved this year.
On the whole, UFIDA’s cloud service business is undoubtedly the most eye-catching in this report card. To discuss the company’s growth secrets in this area, it is necessary to focus on its development of the customer market.
Customers at all levels are advancing in an all-round way, and Yonyou leads the Chinese enterprise cloud service market
At present, network and data security have become the rigid needs of enterprises, and the country continues to increase support for technological innovation. Localization of replacements is progressing steadily. The Xinchuang industry has risen to the height of the national strategy and achieved rapid development. The data shows that the scale of my country's Xinchuang industry will exceed 920 billion yuan in 2022, and it is expected to exceed 2 trillion yuan in 2025, with a five-year compound growth rate of 36%.
Under the general trend of the industry, the number of localization replacement projects of UFIDA has increased significantly, and the scale of customers has also continued to expand, paving the way for UFIDA to continue to increase its size in the wave of localization of central state-owned enterprises.
Judging from the financial report data, in 2022, in the large, medium and small customer markets, UFIDA has achieved a steady growth in cloud service business revenue. Among them, in the large enterprise customer market, the UFIDA cloud service business achieved revenue of 4.39 billion yuan, a year-on-year increase of 17.6%, and the core product renewal rate reached 105.5%. And this market has the highest proportion of revenue, reaching 67%.
Specifically, large enterprise customers are benchmarks and samples in the industry, and have a good publicity case effect. With the cooperation experience with well-known enterprises, UFIDA can win the favor of more large-scale enterprises, thereby increasing project cooperation opportunities and bringing continuous and stable income. It is understood that in order to continue to expand the large-scale customer market, UFIDA has given full play to the role of BIP 3. In 2022, a total of 27 first-level central enterprises have signed contracts, including China Shipbuilding Corporation, China Electronics, National Pipeline Network Group, China Unicom, China Mobile, State Council Machinery Group, Ansteel Group, COFCO and other large enterprises.
In the medium-sized enterprise customer market, the company continued to promote the subscription transformation of cloud products with three major products: YonSuite, U9 Cloud, and U8 Cloud. The cloud service business realized revenue of 630 million yuan, a year-on-year increase of 60.6%, and the renewal rate of core products reached 82%. It is expected that the medium-sized enterprise market will further drive the growth of the company's subscription revenue in the future.
In the small and micro enterprise customer market, UFIDA continued to focus on the two major areas of digital intelligence, taxation and digital intelligence business, and realized cloud service and software business revenue of 680 million yuan, a year-on-year increase of 15.0%.
Being able to achieve in-depth cooperation with many customers reflects UFIDA's rich experience and professional business capabilities. This is concentrated in UFIDA's customized services.
From the perspective of the industry, the currently widely used public cloud has the characteristics of standardization, subscription system, and cloud storage, but it does not match the needs of large enterprise customers. Large enterprise customers often need old network transformation, high customization and deep integration, and The process and business itself are complex. In contrast, the hybrid cloud can better meet its development demands.
UFIDA supports private cloud, public cloud and hybrid cloud, and can provide customers with rich and flexible deployment solutions. And different from Sany Heavy Industry, which started from the manufacturing industry, and Alibaba, which started from the Internet, UFIDA started from management informationization, and has obvious first-mover advantages.
It is worth mentioning that UFIDA's customers have covered 30 industries including manufacturing and finance. Relying on the experience accumulated in the large enterprise customer market, UFIDA has established a team covering product design, implementation and delivery.
These experiences and capabilities have become the company's moat, enabling UFIDA to better meet the complex customization needs of customers compared with its peers, and also providing a solid development guarantee for it to face historical opportunities such as the wave of localization.
According to IDC data, UFIDA continues to lead the Chinese enterprise cloud service market. It has the largest market share in China's application platform cloud service APaaS market and the largest market share in China's enterprise application SaaS market. It has ranked first in the market for many years, and the maintenance of its market position is inseparable from its technical confidence.
Technical support, continuous improvement in business to achieve comprehensive breakthroughs
For technology companies, technology research and development is crucial in order to create barriers to competition. In this regard, after years of development, UFIDA has formed a relatively complete product and technology research and development system in the field of digital intelligence for enterprises and public organizations.
In August 2022, the company released the milestone "Yonyou BIP 3", which further upgrades and achieves comprehensive breakthroughs in the three levels of platform technology and application architecture, field and industry applications, and ecosystem, reaching the world's leading level. Yonyou BIP 3 includes 5 pioneering or leading technologies, 6 leading application architectures, 465 innovative services, and a rapidly growing ecosystem; it has more than 600 core patents and 1,400 software copyrights.
With the coming of the AI boom, UFIDA's layout in BIP 3 may open up a bigger room for imagination. At present, Yonyou has established 70+ scene-based AI large models in BIP, and has 300+ digital intelligence application services based on AI models, such as inventory forecasting. In addition, the company also stated that it will cooperate with Baidu Wenxin Yiyan to integrate generative AI capabilities into financial, human and other products, empower all aspects of ERP, and increase product value. Under this trend, YonBIP is expected to become one of the most important sources of income for UF in the future.
Source: UFIDA 2022 Annual Report
Behind the accumulation of technical strength is continuous research and development investment. The report shows that UFIDA’s R&D investment in the past five years has always remained at a relatively high level. In 2022, the company’s R&D investment will be 2.92 billion yuan, a year-on-year increase of 24.5%, accounting for 31.6% of revenue. The number of R&D personnel has exceeded 9,000, accounting for the total number of employees in the company. 35.7%. And UFIDA’s R&D investment is at a relatively high level in the industry. Taking Dingjie Software as an example, the data shows that its R&D expense ratio has remained above 10% in the past five years, and UFIDA’s total R&D expenses from 2018 to 2021 are about 8.5 billion yuan , the R&D expense ratio exceeds 21%, and the R&D expense ratio reaches 26.5% in the first three quarters of 2022.
2022 is a year full of challenges. UFIDA continues to increase R&D investment during the economic downturn, which proves its strong operational resilience. It is worth mentioning that in 2022, seeing the major opportunities in digitalization and the development of Xinchuang, UFIDA has further increased its investment in personnel, adding more than 4,000 new employees throughout the year, with a growth rate of more than 19%.
Although this has led to an increase in the company's salary pressure, which has a negative impact on profitability in the short term, in the long run, continuous investment will be transformed into a moat for UFIDA in the future and continue to strengthen the company's strength. The financial report shows that on the basis of the strategic growth of the employee scale in 2021 and 2022, UFIDA will also maintain a stable employee size in 2023, continue to optimize the structure, and increase R&D investment, which also lays the foundation for its continued improvement in 2023. Base.
In addition to R & D investment will support the performance of UFIDA, industry dividends will also become the wind of its development. In recent years, the global digital economy has been developing rapidly. According to data, the scale of my country's digital economy market will reach 65 trillion yuan in 2025.
Against the background of the digital economy, the digital transformation of the industry is ushering in historical opportunities, and the wave of superimposed localization continues to advance, and the demand for alternatives to foreign software is expected to explode. Localization will provide development opportunities for domestic ERP manufacturers, and UFIDA has a solid position in the industry, and may benefit from the strategic opportunities of localization. It is expected to undertake more project orders, and its revenue scale will reach a new level.
Author: Lucky
Article source: Songguo Finance