Kingdee
Kingdee International is a Chinese SaaS enterprise management company. It started as a more traditional ERP software licensing business, and has now completed the transformation into a cloud-based, AI-first company. The closest western analogy would be SAP.
The thesis is similar to the ones I have on UiPath and ServiceNow, Kingdee being a company that benefits more from AI than its current valuation would suggest. What makes Kingdee interesting is the growing and increasingly cloud-based Chinese enterprise software market, where domestic companies are increasingly favored, and where the largest domestic competitor is behind in cloud transition.
Kingdee’s main competitor domestically is Yonyou while SAP holds around 15% of the market, its customers almost exclusively being large multinational corporations. I believe Kingdee has the potential to take share from both: it is executing the AI transition better than Yonyou, and starting to compete with SAP in the large multinational companies, when its domestic integration should prove to be an advantage in all other segments.
On 7th of July Kingdee published a postive profit alert, with revenue up 13% to 14% and cash inflow clearly in the positive versus a year ago when it was still negative. The half-year report will be released on 11th of August.
Chinese ERP market
According to estimates I’ve found the Chinese ERP market size would be over US$5B in 2026, and projected to grow at about a CAGR of 12% until 2033. Although I don’t have proper numbers, to my understanding there is also a larger ongoing shift towards cloud services from the still significantly large license-based install-base.
In the recent years there has been a Chinese goverment backed push towards domestic software and data sovereignity. SAP has made efforts to partner with Alibaba and so on to ensure it can remain a choice for the large international companies, but this cannot be a bad thing for the domestic companies like Kingdee.
The size, natural growth, cloud transition and push for domestic software should give Kingdee a fertile enviroment for growth, which already has been strong this year.
While Yonyou is currently the largest ERP player in China, and will likely continue to be the favorite for state-owned-enterprisees, it is also behind Kingdee in the cloud transition and continues to post losses. Cloud is 82.5% of Kingdee’s revenue while for Yonyou it is around 54%. This difference and the flebility to focus on AI on an already more complete cloud platform should prove to be an advantage during the ongoing AI-phase.
Growth for Yonyou in 2025 was 0.03% when for Kingdee it was 12% and in Q1 of 2026 it was 5.9% for Yonyou and 13% to 14% for Kingdee in the first half of 2026. Kingdee does bi-annual reporting.
I don’t claim to know well the intricasies of Kingdee vs Yonyou, but based on factors of profitability, recent growth figures and completeness of Kingdees cloud migration it seems like a more understandable investment.
Valuation
As of 28 July 2026:
| Metric | Value |
|---|---|
| Price | HK$7.39 |
| 52-week low / high | HK$5.26 / HK$19.00 |
| Market cap | HK$25.8B |
| Enterprise value | HK$21.7B |
| Gross Margin | 67.1% |
| Operating Margin | 6.3% |
| Net Margin | 1.3% |
| P/E (trailing) | 246x |
| P/E (forward) | 28.3x |
| P/S | ~3.4x |
| EV/Revenue | ~2.8x |
| P/B | 2.73x |
| P/FCF | ~50x |
| PEG | 0.95 |
| FCF yield | 2.0% |
| Rule of 40 | 18.9% |
| Beta | 0.88 |
| Analyst target (mean) | HK$14.92 — STRONG BUY, 16 analysts (+102%) |
| Reverse-DCF implied FCF growth | 17.5%/yr (WACC 8.8%) |
The trailing P/E of 246x is meaningless, as the company just turned profitable again. The price of Kingdee has dropped over 40% during 2026 along many other software stocks globally. With these multiples the price seems very nice for investing into the growing ERP market of China, with the company that has the strongest recent growth.
SAPs EV/revenue is around 3.9x, when it mostly operates lower growth areas than China. Chinese stocks often have some additional risk priced in, perhaps rightfully so. To my understanding the ERP software segment won’t bear the same total risk to rising tensions, trade or otherwise, as for example semiconductors or exports.
Growth
Revenue grew 12.6% to RMB 7.006 billion in 2025.
| Period | 2025-Q%q | 2024-Q%q | 2023-Q%q |
|---|---|---|---|
| Revenue | HK$7.01B | HK$6.26B | HK$5.68B |
| Net Income | HK$0.09B | HK$-0.14B | HK$-0.21B |
| FCF | HK$0.51B | HK$0.25B | HK$-0.24B |
More accurately:
| Metric | 2025 | Growth |
|---|---|---|
| Cloud revenue | RMB 5.782B | +11.9% |
| Subscription revenue | RMB 3.556B | +20.9% |
| Subscription ARR | RMB 4.09B | +19.2% |
| Contract liabilities | RMB 4.386B | +38% |
| AI contract value | RMB 356M | — |
The net dollar retention rates by product line:
| Product | Segment | FY2025 | FY2024 | YoY Change |
|---|---|---|---|---|
| Kingdee Cloud Cosmic | Large enterprises / Central SOEs | 110% | 108% | +2 ppt |
| Kingdee Cloud Galaxy | Growth enterprises | 97% | 95% | +2 ppt |
| Kingdee Cloud Stellar | SMEs | 94% | 93% | +1 ppt |
| Kingdee Jingdou Cloud | Micro businesses | 88% | 88% | 0 ppt |
The NDR rates are decent, and improving, which is good to see. Higher churn in the segments of the smaller businesses is to be expected.
Deferred revenue growing at 38% while recognized revenue grows at 12% is due to the subscription model transition, it will even out as booked revenue eventually. Income went from a net loss of RMB 140 million in 2024 to a net profit of RMB 93 million in 2025 (RMB 232 million adjusted), and free cash flow doubled from RMB 0.25 billion to RMB 0.51 billion.
Guidance for H1 2026 is revenue up 13–14% with net profit of RMB 40–60 million, against a RMB 98 million loss in H1 2025. Management is targeting over RMB 1 billion of Kingdee AI Suite revenue in 2026, against RMB 356 million of AI contract value in 2025. With growth according to current trends and targets I believe the stock will eventually be priced higher.
Disclaimer
The author has a position in Kingdee at the time of writing. This article is not investment advice.