Goldman Sachs: China Software — AI Features Expand While Monetization Takes Time; Kingdee Downgraded to Neutral, Yonyou to Sell
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Goldman Sachs reports that domestic Chinese ERP vendors are benefiting from accelerated cloud migration and AI feature expansion in the AI era. However, incremental revenue from native AI applications will require more time to materialize. Consequently, Goldman downgraded Kingdee International (0268.HK) to Neutral from Buy with a 12-month target price of HKD 12, and Yonyou Network (600588.SS) to Sell from Neutral with a target price of RMB 9.03.
For Kingdee, Goldman lowered its 2025 to 2027E revenue forecasts by 0%, 4%, and 7%, and net profit estimates by 5%, 14%, and 13%, citing lower revenue expectations and rising operating expense ratios. The target price reduction to HKD 12 is based on a discounted cash flow valuation using a 12.1% weighted average cost of capital and a 2% terminal growth rate. Kingdee has launched 30 to 40 AI agents covering chat business intelligence and knowledge assistants.
For Yonyou, fourth-quarter 2025 revenue guidance of RMB 3.6 to 3.7 billion fell significantly below Goldman's expectation of RMB 5.6 billion due to weak spending from large and medium-sized enterprises. Yonyou's 2025E net loss widened to RMB 1.3 billion, and 2026 to 2028E earnings were downgraded by 28%, 28%, and 32%. The target price was reduced to RMB 9.03 based on a DCF valuation.
Goldman believes ERP vendors possess structural data and proprietary technology to support differentiated generative AI solutions long-term. However, cloud migration and standalone AI features will remain the primary growth drivers in the near term.