New Stock Preview | At a time of performance recovery, what are the chances of Yonyou Network Technology (600588.SH) listing in Hong Kong?

The Hong Kong IPO market has been exceptionally lively since the beginning of this year, with a wave of listings being launched. Data shows that in the first half of 2025, the Hong Kong IPO market raised a total of HK$107.1 billion, a seven-fold increase from the same period last year, ranking first globally and second highest in the same period over the past decade, surpassing the total fundraising amount for the whole of 2024. It is worth noting that A-share listed companies are flocking to Hong Kong for IPOs, becoming the main theme of Hong Kong IPOs this year. According to statistics, in the first half of 2025, 50 A-share listed companies in Hong Kong submitted applications for IPOs. At the same time, the reserve team continues to expand, with dozens of A-share listed companies planning to go public in Hong Kong. Analysts point out that the key reason for A-share companies choosing to go public in Hong Kong is globalization. At the same time, these companies, due to their listing status on the A-share market, are expected to achieve more comprehensive value discovery and more reasonable valuation pricing in the Hong Kong market. Industry insiders also point out that a secondary listing in Hong Kong helps companies attract high-end talent from overseas and expand international clients, providing strong support for the company's global strategy. It is worth noting that recently, another A-share listed company plans to list on the Hong Kong Stock Exchange. According to the Hong Kong Stock Exchange, Yonyou Network Technology Co., Ltd. (600588.SH) (hereinafter referred to as "Yonyou Network Technology") has submitted an application for listing on the main board of the Hong Kong Stock Exchange, with CMB International and CITIC SEC as its joint sponsors. Can Yonyou Network Technology successfully go public in Hong Kong under performance pressure? The largest participant in the Chinese enterprise software and services market According to the prospectus, Yonyou Network Technology is a global leader in enterprise software and intelligent services providers, committed to the development, sales, and service of enterprise digitalization software and intelligent services using AI, big data, and cloud computing as core technologies. According to Frost & Sullivan data based on 2024 revenue, the company is the largest participant in the Chinese enterprise software and services market. The company's strategic focus is on leading industry innovation through the development of AI-intelligent cluster applications tailored for enterprises. The company has undergone three key development stages since its establishment in 1988: from a product perspective, the company has transitioned from financial software to ERP (enterprise resource planning) to BIP (Yonyou Business Innovation Platform); and from an organizational structure perspective, the company has evolved from a distributor model to a regional model to an industry-focused model for large enterprises. With the advantage of being a pioneer in the market and a deep understanding of enterprise services, the company currently has a rich product portfolio covering large, medium, and small customers, serving more than 40,000 medium and large enterprises and over 660,000 small and micro enterprises, consistently ranking first in the industry market share for many years. From a business perspective, Yonyou Network Technology embarked on a comprehensive transformation from software services to cloud services with the launch of the YonBIP in 2020, marking the new stage of its 3.0 strategy, upgrading from product service to platform service. Leveraging artificial intelligence technology, Yonyou Network Technology is leading the development of enterprise digitalization and intelligent software and service market. In terms of products, the company offers a rich product portfolio of enterprise software and intelligent services to meet the digitization needs of enterprises of all sizes (from small and micro enterprises to large integrated enterprises and public organizations). The company's cloud services primarily include the YonBIP series products, U9cloud, CHANJET products, and industry-specific solutions. Among them, YonBIP is the core platform of the company's cloud services, designed to provide comprehensive tools, capabilities, and resources to support enterprise digital transformation and intelligent operational. With YonBIP's strong technical foundation and modular delivery capabilities, the company has launched the YonBIP product series, including YonBIP for large enterprises and YonSuite for medium-sized enterprises. YonBIP effectively addresses long-standing issues in traditional enterprise software such as application isolation, data fragmenting, and disconnected AI capabilities, accurately matching advanced demands for enterprise digital transformation. Performance recovery in progress However, looking at the performance, although Yonyou Network Technology is a leader in the industry with a continuously optimized strategy, the company continues to face pressure. In 2022, 2023, and 2024, Yonyou Network Technology achieved revenues of approximately RMB 8.89 billion, 9.44 billion, and 8.817 billion respectively, showing a fluctuating downward trend. During the same period, the net profit for the year was approximately RMB 225 million, -933 million, and -2.07 billion, plummeting into losses. Recently, the company disclosed the performance forecast for the first half of 2025, showing that Yonyou Network Technology's losses have further expanded. According to the announcement, the company expects revenues in the first half of 2025 to be between RMB 3.56 billion and 3.64 billion, a year-on-year decrease of 4.3%-6.4%; while the net profit attributable to shareholders is expected to be between RMB 875 million and 975 million, an increase of 10.2%-22.8% year-on-year. The company explains that its business operations have seasonal characteristics, with revenue in the first half of the year accounting for a lower proportion of the annual revenue compared to the first half of the year's cost and expenses. At the same time, the capitalized intangible assets amortization generated by R&D investment is expected to increase by approximately RMB 120 million year-on-year, and severance compensation is expected to increase by approximately RMB 30 million year-on-year. However, CICC pointed out that the widening losses in the first half of this year were mainly due to the significant drag on performance in the first quarter. In the second quarter of this year, the company expects revenues to be between RMB 21.8-22.6 billion, a year-on-year increase of 6.1%-10%, signaling a turnaround from the previous decline to positive growth; while net profit attributable to shareholders is expected to be a loss of RMB 139-239 million, a significant reduction in losses of RMB 100-200 million year-on-year; operating cash flow is expected to achieve net inflows for the quarter, improving by about RMB 320 million from the same period last year, accumulating improvements of about RMB 600 million year-on-year for the first half of the year. GF Securities further noted that the company's performance is better than the market's pessimistic expectations, showing signs of recovery. In addition, the company has shown a good trend in contract signings since February this year, with positive growth in several months, especially in the second quarter when it further accelerated. The amount of single-quarter contract signings in the second quarter grew by over 18% year-on-year, driving a cumulative growth of 8% in contract signings for the first half of the year. GF Securities stated that the improvement in contract signing trends supports the company's positive revenue growth in the second quarter and lays the foundation for further recovery in revenue for the subsequent quarters, with a hopeful expectation of positive revenue growth for the whole year. It is worth mentioning that the core goal of this Hong Kong IPO is to support the company's "Globalization 2.0" strategy. It is understood that the company launched the Globalization 2.0 strategy in 2023, planning to cover over 100 countries within 3 years to create an additional revenue growth curve. Currently, the company has established subsidiaries in Singapore, Japan, Mexico, Germany, and the UAE, and in the first quarter of 2025, the company mentioned that it is actively expanding into the Americas, Europe, and the Middle East markets, serving Chinese companies going global and local companies overseas in their digitization efforts. In this context, the company's overseas market revenue has been increasing year by year, with overseas market revenue in 2024 reaching RMB 218 million, a year-on-year increase of 6.74%. GF Securities pointed out that from an enterprise strategy perspective, the listing of top-tier companies in Hong Kong is often accompanied by the need for international development. Through the international financial window of Hong Kong, companies can more easily connect to the global industrial chain, attract overseas partners, enhance their brand influence in international markets, and lay a solid foundation for future multinational operations. Overall, Yonyou Network Technology's IPO in Hong Kong is seen as an important step in its "Globalization 2.0" strategy. Despite the recent performance pressure, the company's leading position in enterprise digitization and continuous technical investment still provide a foundation for its long-term development. By further expanding international financing channels through the Hong Kong listing and leveraging the global platform of the Hong Kong market to optimize its capital structure, the company may better grasp the global opportunities in enterprise cloud services and AI applications. In the future, the effectiveness of its global strategy implementation and the improvement of profitability will be the focus of continued investor attention.