Recently, the stock price of Ufida Software Co., Ltd. (600588.SH) experienced a significant surge, capturing the attention of the marketIn response to the unusual fluctuations in its stock price, the company released a statement indicating that, apart from matters already disclosed, there are no significant undisclosed information that necessitates announcement. While the company has integrated certain products with Deep Seek, it clarified that it has not entered into any service cooperation agreements with Deep Seek and holds no business partnership with the firm, asserting that this development has no substantial impact on its core business activitiesInvestors were urged to make informed and judicious investment decisions.
In stark contrast to the company’s stock price surge following the Deep Seek announcement, the financial forecasts reveal a gloomy outlook. For the year 2024, Ufida anticipates a net loss ranging from 1.72 billion to 1.92 billion yuan, marking an almost 80% increase from the previous year’s losses. This is not the first time Ufida has reported losses; the company has been grappling with significant deficits since 2023.
Under mounting pressure from competitors like DingTalk and WeChat Work, Ufida's stock price has plummeted by over 80% since its peak in 2020. Predictions for 2024 potentially show a further 40% decline; at the end of the year, the controlling shareholders of Ufida had pledged more than 30% of their sharesThe company continues to face operational strains from intensified industry competition and internal management challenges, despite the leadership change where Wang Wenjing relinquished his role as President.
The survival predicament amid intense competition from titans.
Founded over 30 years ago, Ufida began its journey in financial software, deeply entrenched in the enterprise ERP (Enterprise Resource Planning) sector. Its customer base spans across large enterprises in various sectors, including healthcare, finance, and tobacco.
However, the entrance of internet giants like Alibaba, Tencent, and Huawei into the SaaS (Software as a Service) arena has diluted Ufida's competitive edge.
The launch of Huawei's MetaERP proved to be a devastating blow for Ufida. In April 2023, Huawei announced its self-developed MetaERP system, which directly challenged Ufida's core operations
Advertisements
Despite Ufida's assertion that the market reacted excessively, its stock saw a steep decline, ultimately wiping out over 10 billion yuan in market capitalization.
This competitive pressure is clearly represented in the financial metrics, where the sales expense ratio shot up from 22.7% in 2021 to 30.04% in the first half of 2024, while R&D expense ratios increased from 16.9% to 27.95%. However, the gross profit margin simultaneously dropped from 61.25% to 52.55%.
Faced with the daunting challenge of inevitable losses, Ufida struggled with a stark decline in net profits, which plummeted from a drop of 16.43% in 2020 to a staggering 541.28% in the third quarter of 2023. The company reported its first loss of 9.67 billion yuan in 2023, which is projected to surge to between 1.72 billion to 1.92 billion yuan in 2024.
After aggressive attempts to turn the tide, a painful contraction in strategy ensued, leading to a reduction of 3,700 jobs at Ufida by 2024. The company's performance forecast also indicates a predicted decline of 6%-7% in signed contracts due to macroeconomic influences, alongside an increase in withdrawal compensation costs spurred by personnel optimization, amounting to approximately 300 million yuan and 140 million yuan respectivelyThese factors culminated in exacerbated losses for Ufida.
A collection of amassed receivables has started to burden Ufida after its years of rapid expansion. Despite having recognized asset impairment losses exceeding 900 million yuan from 2021 to the first half of 2024, the company’s accounts receivable rose from 1.44 billion yuan to 2.783 billion yuan.
In response to the shifting market landscape, Wang Wenjing, the actual controller of Ufida and a native of Jiangxi, stepped down from the president position at the beginning of 2024, with veteran Chen Qiangbing taking over. Shortly after Chen's one-year tenure, the company appointed Huang Chenhong as the new president
Advertisements
Huang previously served as the global executive vice president at SAP SE, president of SAP Greater China, and general manager of Dell China, bringing a wealth of experience from multinational corporationsHis appointment reflects Ufida's ambition for greater internationalization.
Continuous losses exert immense pressure on stock prices.
The entrance of tech giants and the financial losses experienced have put substantial pressure on Ufida's stock prices, which have displayed a notable downtrend since their peak in 2020, plunging over 80%. Throughout 2024, the stock is expected to drop approximately 40%.
This ongoing reduction in stock price has severely heightened the pledge risk for Beijing Ufida Technology and its aligned stakeholders. In early 2024, they had pledged only 19.39% of their company shares, yet by the end of December, this proportion escalated to 30.77%, accumulating 437 million pledged shares, constituting 12.8% of the total equityThe frequent supplementary pledges have temporarily alleviated their liquidation risk, but the financing is primarily intended for “supplementing liquidity,” thus revealing the controller's funding chain strains.
To stabilize market confidence, Ufida has initiated multiple buyback plans in recent years. Since 2021, the total buyback has exceeded 2.1 billion yuan, with an additional 50 million to 100 million yuan planned for repurchase in September 2024. Furthermore, a document released in July 2024 titled "Quality Improvement and Efficiency Restoration Action Plan" emphasized focusing on core operations and enhancing communication with investors.
The predicaments faced by Ufida reflect the common challenges in the transformation of traditional software companies. On one side, the company must contend with the cross-border incursions of internet giants; on the other, it is necessitated to discover new growth points amidst escalating losses and high pledge risks. Despite the company’s attempts at layoffs, buybacks, and global ventures, if breakthroughs aren’t made in sectors like cloud services and AI, prospects for restoring investor confidence may remain bleak.
In the face of challenges, Ufida is proactively embracing new technologies to seek a turnaround. On February 6, it was announced that "Ufida BIP has fully launched intelligent services built on the DeepSeek-V3 and DeepSeek-R1 foundation models
Advertisements
Advertisements
Advertisements