Nomura: Downgrades the target price for Kingdee International to HKD 11.87, reaffirms "Buy" rating.

Nomura published a report stating that Kingdee International's revenue in the first half of the year increased by 13.6% year-on-year to 3.6 billion yuan, posting a net profit of 54.5 million yuan. Cloud service revenue grew by 16.6% year-on-year to 3.1 billion yuan, while subscription revenue increased by 20.4% to 2 billion yuan. The annual recurring revenue from subscriptions is approximately 4.4 billion yuan, mainly driven by the growth of the Kingdee AI suite and strong demand from several industry clients. The gross margin continues to show an upward trend, increasing by 2.1 percentage points year-on-year to 67.7%. The bank believes this is due to ongoing structural changes toward subscriptions and high-value artificial intelligence products. The bank considers that Kingdee is moving in the right direction towards transforming into an AI-native company, with AI agents becoming its new growth engine. Given the strong growth maintained in the first half of the year and the accelerated commercialization of AI native products, the bank reiterated its "Buy" rating but lowered the target price from HKD 18.49 by 35.8% to HKD 11.87.