J.P. Morgan: Yonyou Network (600588) Updating Model After Uninspiring FY25 Results
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J.P. Morgan updated its model on Yonyou Network following deeply disappointing FY25 results, reiterating a Neutral rating. Full-year revenue grew a mere 0.3%, and fourth-quarter net profit was only RMB 9 million, marking one of the worst fourth-quarter bottom lines in two decades. Consequently, the analyst cut FY26-27 revenue estimates by approximately 5% and lowered the DCF-based target price from RMB 14.0 to RMB 12.0. This new target sits about 2% below the current trading price of RMB 12.2.
Despite management's optimistic guidance for a 5-percentage-point gross margin expansion in 2026 and ambitious AI prospects, J.P. Morgan remains skeptical. The firm categorizes Yonyou in the "show me" camp, emphasizing that the market demands tangible evidence rather than promises. While fourth-quarter gross margins did recover to 54% and operating expense growth was contained, the overall execution record remains weak. Furthermore, the report unfavorably compares Yonyou to Kingdee International, which trades at an EV-to-revenue multiple of roughly 3x compared to Yonyou's premium valuation of over 4x. Despite Kingdee possessing superior growth visibility and profitability, J.P. Morgan prefers Kingdee with an Overweight rating. Consensus estimates for Yonyou still carry significant downside risk as the company struggles to demonstrate sustained revenue momentum.