Credit Suisse raised its target price for Kingdee International Software (00268) to HK$7.02 from HK$6.5 and maintained its "underperform" rating.
The research house said Kingdee's 1H results were largely in line, except for operating profit which came in above on higher-than-expected government grant and rental income. Management maintained guidance for 2019 cloud services revenue to growth by 50%, and 60% cloud business mix by 2020.
Credit Suisse still thinks it's difficult to meet 2020 revenue mix given: (1) limited Cosmic revenue contribution in 2019/20; (2) operating profit pressure to persist given higher sales and R&D investment into Cosmic Cloud; (3) ERP (enterprise resource planning) business needs drop 16% CAGR to achieve the min. cloud target.
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