Kingdee International 1H26 Profit Alert: Solid Fundamentals Against LLM Concerns
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Nomura maintains a Buy rating on Kingdee International (0268.HK) with a DCF-based target price of HK$18.49. The company issued a positive profit alert for the first half of 2026, expecting revenue of RMB 3.608 billion to RMB 3.639 billion, representing 13–14% year-on-year growth driven by sustained subscription revenue and robust demand for AI-native products.
Management forecasts a net profit of RMB 40 million to RMB 60 million for 1H26, a significant turnaround from a net loss of RMB 98 million in 1H25. This improvement stems from operating leverage in the subscription business and AI-driven efficiency gains. Operating cash flow is also projected to turn positive, with net inflows of RMB 130 million to RMB 150 million, compared to a net outflow of RMB 18 million a year earlier.
Nomura believes Kingdee's core cloud ERP franchise remains resilient. While market concerns persist regarding potential disruption from large language model (LLM) companies, the firm anticipates that Kingdee's proprietary AI solutions will gradually accelerate revenue growth and enhance profitability. Short-term LLM headwinds may persist, but management is pivoting toward an AI-native enterprise model to capitalize on generative AI. Key downside risks include slower cloud revenue growth, delayed profitability from competitive pressures or R&D spending, and intensified competition from next-generation cloud platforms.