Caitong: Maintain a "buy" rating on KINGDEE INT'L (00268) and subscribe to stable growth in ARR.

Caitong issued a research report stating that it is expected that KINGDEE INT'L (00268) will achieve operating income of 7.94/9.04/10.27 billion yuan from 2026 to 2028, with corresponding PS ratios of 3.1/2.7/2.4X. Considering the company's resilience in renewals and ARR performance, and the smooth progress of AI native products, the "buy" rating is maintained. Key points from Caitong: Events On April 13, 2026, KINGDEE INT'L released first quarter operating data. As of March 31, 2026, the company's subscribed ARR was approximately 4.22 billion yuan, with NDR for Xinghan/Xingkong/Xingchen at 103%/96%/94%, and AI suite contract amount of 2.3 billion yuan. Upside trend in new signed subscription ARR As of 1Q26, the company's subscribed ARR increased by 18.5% year-on-year to 4.24 billion yuan, with a net addition of 0.13 billion yuan in the quarter. The bank further decomposed the growth of ARR into two parts - renewal and new signed: 1) Renewal part, Xingkong and Xingchen are stable and improving, with NDR improving by 2pct year-on-year to 96%/94%. 2) Upside trend in new signed contracts, with customers signed including Henan Shuanghui Investment & Development, and Mianbi Intelligence. Strong demand for AI suites, with new contract amount reaching 2.3 billion yuan AI suite is the company's newly launched AI native ERP product, focusing on medium to large customers. According to discussions during the 2025 financial performance conference, the company expects AI suite revenue to reach 10 billion yuan in 2026. The contract amount for AI suites in this quarter has reached 2.3 billion yuan, indicating strong customer purchasing intention, and revenue targets are being pursued on schedule. The growth in AI orders is expected to alleviate concerns in the market about the narrative of "AI swallowing software"/"SaaS doomsday," and the subsequent growth in contracts and revenue momentum are worth monitoring. Risks: Economic recovery falling short of expectations, intensifying competition in the ERP market, AI development impacting software development value and business model risks, and product transformation progress falling short of expectations.