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Investing.com - HSBC initiated coverage on Kingdee Int’l Software Group Co. (HK:268) (OTC:KGDEF) with a Buy rating and a price target of HK$18.20.
The investment bank cited three key industry tailwinds expected to benefit the Chinese enterprise resource planning (ERP) software provider: artificial intelligence adoption, software localization requirements, and easing competition in the sector.
HSBC noted that enterprises are increasingly adopting AI tools to improve efficiency and reduce costs, with ERP systems playing a crucial role in these initiatives. The firm highlighted that the subscription model is gaining popularity among customers due to the frequent updates required for AI applications and the high initial costs of license models.
The localization trend is accelerating as Chinese state-owned enterprises face a 2027 deadline to replace foreign software with local alternatives, while recent U.S. export restrictions on critical software to China further drive this shift. HSBC projects China’s ERP sector to grow at a compound annual growth rate of 11% from 2025-2029, up from 7% in 2022-2025.
HSBC also pointed to easing competition in the sector as smaller ERP companies exit the market after sustaining losses from aggressive low-price expansion strategies, creating a more favorable environment for domestic market leaders like Kingdee.
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