Intuit of China - Chanjet (1588 HK)

Before we start, something worth pointing out. MV of Chanjet is only Rmb1.2bn. It has net cash of Rmb1.3bn. Basically, we are buying the business for a song.

One of the more contentious question is what does AI mean for software companies ?

The word SaaS-pocalypse captures it pretty well. If you believe SaaS/software will be wiped out by AI, move on. I am taking the other side of the trade.

Here is my idea. Fundamentally, software is about automating business processes and save businesses time and money along the way. Put it another way, software leads to saving in labor. Now in the era of AI, software has something that AI needs (a lot of) i.e. underlying data. In addition, with AI, software can automate even more business processes. Thus think of SaaS companies as another distribution layer for AI. In the AI world, SaaS co can charge for AI-enhanced functions (which businesses will pay for) if they end up saving more money for customers (i.e. more automation and less labor cost).

Within software, one of the most sticky segment is ERP because ERP software (with functions like accounting/HR/supply chain) is mission critical. Thus, even if AI eventually disrupts software, ERP will be more resilient relative to other point solutions.

In China, the leading domestic ERP co are Kingdee, Yonyou, and Inspur. There are a few others but these are the big 3 and all listed.

Chanjet is the small business division of Yonyou. This is my short cut to say the business is real and Chanjet is a serious software company (despite its small cap). Have a look at Pic 2. In the past 5 years, Chanjet grew about 70-80%. Its growth was in line with Kingdee (the bottom row). Kingdee is widely acknowledged as the market leader in ERP (and more commercial and switched on than Yonyou).

Problem with Yonyou is it got its start serving the large govt/SOEs. With these large customers, Yonyou have to customise its software endlessly. Yonyou has never been that profitable as a software company as it has become a quasi-system integrator as well.

While Chanjet is the small business division of Yonyou, it sits at the opposite end of the spectrum i.e. its small customers have to take the SaaS software as is and no customisation. Profit potential of Chanjet is very much different than the parent. In fact, I would argue Chanjet is the crown jewel of Yonyou.

Chanjet had sales of Rmb1.1bn in 2025. It is the market leader in small business tax/accounting software (just like Intuit) and ERP for small businesses. When you think about it, Rmb1.1bn or so in sales is nothing for the No.1 small business accounting software co in China. Its ARPU is only about Rmb1700 (or a little under US$250). It has 1.1M cumulative paying cloud customers.

To put it in perspective, there are 17-18M small businesses (in various industries) in China that are potential customers for Chanjet. As we can see, Chanjet is very much a growth stock. The question is how is it going to convert these small businesses ? Afterall, its key competition is "the way we used to do things here" in any small businesses. The hook is the government is pushing businesses to issue electronic invoices which are then linked to the local tax office.

In Chanjet, there are two businesses. Around 70% of business is its SaaS software. Another 30% of sales is its ERP business for larger small businesses (which are sold like typical perpetual software licenses).

The proof in the franchise power of Chanjet is its history. Despite the Chinese economy being sluggish, it grew its sales from Rmb600M to Rmb1.1bn between 2021-2025. Its ARPU has been flattish since 2024 (pricing power of sorts). Its customer retention is 87% (remember small businesses do go under so retention is typically lower than say SAP or Oracle).

Its 1H 26 result was decent actually. Sales grew 13% yoy. Cloud subscription grew 19% and contract liabilities grew over 20% yoy. In the context of a sluggish Chinese economy, Chanjet is proving to be one of the rare "growthy" companies.

Why is Chanjet interesting ?

1. As mentioned, Chanjet (the stock) has been smoked (being a Chinese stock in HK + a software stock that is going to be road kill for AI). So the stock is available for less than its cash on balance sheet.

2. The company has proven itself in the past few years. It is winning in the SMB SaaS market in China. It only has 1.1M SaaS customers so plenty of growth opportunities.

3. My contrarian take is AI is going to be seen as good for ERP companies at some point. Chanjet has launched its "claw" + agentic products already. So Chanjet is another distribution layer for AI (with its margin on top).

4. AI-infused tax software can be disruptive i.e. it will cost much less than filing through an accountant.

5. The business is inflecting. It is targeting net margin of >10% in 2026. Growth of around 10%. Sales expected to accelerate a bit in 2027. Tell is Chanjet is now paying dividends (around 3-4% yield).

So running the numbers... Rmb1.2bn in sales in 2026. Net profit of Rmb110-120M. The stock is 10-11X. Around 1X sales. MV is < than its cash on hand. 3-4% yield. It is a growth stock value as a value stock (because of AI). Before the AI disruption fear, Intuit would trade on much higher PE (closer to 20X than 10X). In addition, Kingdee trades at 2.5-3X sales despite the sharp pull back.

Noticeably, the stock has gone nowhere but down for like 10 years. Ironically, profitability of the cloud/SaaS business is finally inflecting after a decade plus of investment. Key criticism is low liquidity (Yonyou owns 60% of Chanjet so free float is not much and funds aren't interested). BUT my take is it pays a dividend so I am OK to wait as it grows in coming years.

Again, the contrarian bet is good ERP companies can take advantage of AI and grow even faster as software automates more business processes.

In coming years, upside is significant. Growth stocks in HK/China will re-rate at some point.

Note.. Do your own research. Not financial advice.