Goldman Sachs Reiterates Sell Rating on Glodon, Lowers Target Price to 9.33 Yuan

Overview

This report provides Goldman Sachs' commentary following Glodon's annual event. The report notes that 2026 is the first year of Glodon's tenth three-year plan, during which management has established strategic directions centered on integrated platform consolidation, AI transformation in construction, expansion into high-growth segments (such as infrastructure and urban renewal), and accelerating overseas expansion. However, affected by weaker-than-expected momentum in new construction projects, the company's Q1 revenue declined 5% YoY to 1.2 billion yuan. Given short-term revenue pressure and increased R&D expenditures, Goldman Sachs has significantly lowered its earnings forecasts for the company over the next three years and reduced its target price from 10.89 yuan to 9.33 yuan, maintaining a "Sell" rating.

Core views

Short-term Performance Pressure and Earnings Forecast Downgrade: Glodon's Q1 2026 revenue performance was weak, declining 5% YoY to 1.2 billion RMB, primarily due to weaker-than-expected momentum in new construction projects. Affected by this, coupled with increased operating expenditures on platform upgrades and AI tool R&D, Goldman Sachs has significantly lowered its EPS forecasts for Glodon in 2026, 2027, and 2028 by 27%, 32%, and 29%, respectively. This adjustment mainly reflects conservative expectations for revenue growth in cost estimation software and construction management software. Long-term Strategy Focused on AI and Platformization: Despite short-term challenges, management emphasized the long-term transformation path. As the starting point of the new three-year plan in 2026, the company is committed to better integrating cost estimation, construction, and design data through a next-generation platform to achieve synergies. Regarding AI, the company focuses on high-quality data, high-value scenarios, and reliable models. It has accumulated effective data assets and established an AI engineering department, launching core AI products such as PMLead and PMSmart, aiming to unlock customer value through industry-customized solutions. Market Expansion and Breakthroughs in New Areas: In terms of market expansion, the company is leveraging AI to enhance product competitiveness, extending its cost estimation business from traditional real estate projects to new areas such as industry and energy. In the construction management business, the company is upgrading platform solutions, first collaborating with multiple clients to create flagship projects before promoting them to a broader client base. Additionally, accelerating overseas market expansion is one of the key priorities of the new three-year plan.

Analysis framework

Goldman Sachs' analysis logic primarily follows a framework of "Short-term Fundamental Validation + Long-term Strategic Discounting." First, it validates short-term industry prosperity through actual Q1 revenue data, confirming the direct impact of weak new construction projects on revenue. Second, combining management's strategic guidance in the new three-year plan (AI, platformization, new markets), it assesses long-term growth potential but believes these positives are not yet sufficient to offset short-term earnings declines and cost pressures from R&D investments. Finally, it employs a Discounted Cash Flow (DCF) model for valuation, adjusting parameters such as WACC and terminal growth rates to derive a target price below the current stock price, thereby maintaining the Sell rating.

Methodology notes

• Valuation MethodDCF Discounted Cash Flow

  Two-stage DCF Valuation Model

  Goldman Sachs uses a two-stage free cash flow discount model to value Glodon. This method divides the company's future cash flows into a high-growth phase and a stable-growth phase, discounting them back to present value using the Weighted Average Cost of Capital (WACC). The report sets 2032-2036 as the second stage, with a free cash flow growth rate of 2%, a terminal growth rate of 2%, and a WACC of 11.7% (calculated based on a Beta of 1.3, risk-free rate of 3.0%, and market risk premium of 6.5%). This approach is more suitable for capturing the long-term cash flow generation capabilities of technology companies rather than relying solely on short-term P/E ratios.

• Industry/Industrial Analysis FrameworkUpstream-Midstream-Downstream Transmission in Industrial Chain

  Transmission of New Construction Projects to Upstream Software Demand

  The report analyzes the demand transmission mechanism from the upstream of the construction industry (new construction projects) to the midstream and downstream (construction software services). It points out that the weakening momentum of new construction projects directly leads to a decline in demand for cost estimation and construction management software, reflecting the direct impact of cyclical fluctuations in the construction industry on the performance of upstream SaaS vendors.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Glodon (002410.SS)

  Coverage target, negatively affected by the downturn in the construction industry cycle and weak new construction projects

  Strengths

  Possesses high-quality industry data assets, AI products (such as PMLead) are gradually being implemented, and platform integration brings synergies

  Weaknesses

  Weak short-term revenue growth, increased R&D and operating expenditures eroding profits, high dependence on new construction projects

  Risks

  If the macro real estate market recovers faster than expected, or if AI commercialization progresses beyond expectations, it could constitute upside risks

Key data

• 2026Q1 Revenue1.2 billion yuanDown 5% YoY, affected by weak new construction projects
• Target Price9.33 yuanLowered from previous 10.89 yuan, implying a 2026 price-to-sales ratio of approximately 2x
• EPS Forecast Adjustment2026-28E lowered by 27%/32%/29% respectivelyMainly due to lower revenue expectations and increased R&D and operating expenditures
• WACC Assumption11.7%Based on Beta 1.3, risk-free rate 3.0%, market risk premium 6.5%

Impact & implications

For investors, the report indicates that Glodon continues to face pressure from the downturn in the construction industry cycle in the short term, and the insufficiency of new construction projects will continue to constrain revenue growth in its traditional core businesses (cost estimation, construction management). Although AI transformation and new market expansion provide long-term imaginative space, current R&D investments have increased cost burdens, leading to lagging earnings recovery. Maintaining a Sell rating implies that institutions believe the current stock price has not yet fully reflected the deterioration in short-term fundamentals, and the valuation remains high relative to its growth prospects.

Risks

• Digitalization process in the construction industry faster than expected
• Expansion speed of construction management business faster than expected
• Improvement in macro economy and real estate market
• Easing of industry competition landscape