Investment Rating - The report assigns a "Buy" rating for Kingsoft Corporation (3888 HK) with a target price raised from HKD 33 to HKD 50, indicating a potential upside of 18.1% [2][11]. Core Insights - The report highlights that Kingsoft's Q4 profits exceeded expectations, with a projected 31% revenue growth in the gaming segment for 2024, driven by new game releases. The operating profit margin for the gaming business is expected to improve by 15 percentage points to 42% [2][6]. - The application of AI features in WPS is anticipated to continue driving rapid growth in WPS 365 and personal subscription services. The report adjusts profit forecasts based on a 10x/25x P/E ratio for gaming/WPS businesses and an increase in Kingsoft Cloud's market value [2][6]. - The report notes that WPS had a total of 41.7 million paid users by the end of 2024, a 17% year-on-year increase, with AI functionalities enhancing user engagement and conversion rates [6]. Financial Performance Summary - For 2025, the revenue forecast is set at RMB 11,495 million, reflecting a 4% increase from the previous estimate. The gaming segment is expected to generate RMB 5,475 million, a 6% increase, while WPS is projected to reach RMB 6,019 million, a 3% increase [5][13]. - The gross profit for 2025 is estimated at RMB 9,542 million, with a gross margin of 83%, up from 80% in the previous forecast [5][13]. - Adjusted operating profit is forecasted at RMB 4,079 million for 2025, with an adjusted operating margin of 35% [5][13]. Stock Performance - Kingsoft's stock has shown a year-to-date increase of 25.85%, with a 52-week high of HKD 46.90 and a low of HKD 20.10 [4][11].

Investment Rating - The report maintains a "Buy" rating for the company, with a target price raised from HKD 33 to HKD 50, indicating a potential upside of 18.1% from the current price of HKD 42.35 [1][2][11]. Core Insights - The company's fourth-quarter profits exceeded expectations, with a total revenue growth of 21% year-on-year, driven by a 26% increase in gaming revenue and a 17% increase in WPS revenue. The adjusted operating profit rose by 47% year-on-year, surpassing market expectations by 18% due to optimized expense ratios [6][7]. - The gaming business is expected to achieve a 31% revenue growth in 2024, supported by new game releases. The WPS AI features are anticipated to continue driving rapid growth in WPS 365 and personal subscription services [2][6]. - The report projects revenue for 2025 to reach RMB 11,495 million, with a gross profit of RMB 9,542 million, reflecting a gross margin of 83% [5][13]. Financial Performance Summary - Revenue for 2024 is forecasted at RMB 10,318 million, with a significant increase in adjusted operating profit to RMB 4,079 million, maintaining a robust operating margin of 35% [5][13]. - The company’s net profit for 2025 is estimated at RMB 1,819 million, with a Non-GAAP net profit of RMB 2,756 million, indicating a net profit margin of 24% [5][13]. - The company’s market capitalization stands at approximately HKD 56,188.29 million, with a year-to-date stock price change of 25.85% [4].

Financial Performance - Revenue for the year ended December 31, 2024, reached RMB 10,317,904 thousand, representing a 21% increase from RMB 8,533,611 thousand in 2023[3] - Operating profit increased by 64% to RMB 3,646,623 thousand, compared to RMB 2,226,882 thousand in the previous year[3] - Profit attributable to equity holders of the parent surged by 221% to RMB 1,551,613 thousand, up from RMB 483,457 thousand in 2023[3] - Basic earnings per share rose to RMB 1.16, a 222% increase from RMB 0.36 in the prior year[3] - The company reported a net profit of RMB 2,797,096 thousand for the year, compared to RMB 1,215,188 thousand in 2023[9] - The company's profit for the year ended December 31, 2024, was RMB 2,797,096,000, a significant increase of 130.5% compared to RMB 1,215,188,000 in 2023[10] - Total comprehensive income for the year was RMB 2,853,311,000, up 122.5% from RMB 1,285,670,000 in the previous year[10] - The gross profit for 2024 was RMB 8,580.5 million, reflecting a 22% increase year-on-year, with a gross margin of 83%[76] - The operating profit before share-based compensation for 2024 grew by 54% to RMB 3,922.5 million compared to the previous year[82] Dividends and Shareholder Returns - The board proposed a final dividend of HKD 0.15 per share, up from HKD 0.14 per share in 2023[5] - The company declared a dividend of RMB 170,337,000 for the year 2023, reflecting its commitment to returning value to shareholders[11] - The proposed final dividend for 2024 is HKD 0.15 per share, compared to HKD 0.14 per share in 2023, resulting in a total of RMB 184,613,000 for the year[42] - The company repurchased shares worth RMB 397,098,000 during the year, indicating a strategy to enhance shareholder value[11] - The company repurchased a total of 21,062,800 shares at a total cost of approximately HKD 435.60 million during 2024[102] Assets and Liabilities - Non-current assets totaled RMB 8,044,078 thousand, a decrease from RMB 8,301,498 thousand in 2023[6] - Current assets increased to RMB 30,240,397 thousand from RMB 26,893,214 thousand in the previous year[6] - Total liabilities increased significantly to RMB 9,872,073 thousand, compared to RMB 8,621,455 thousand in 2023[8] - The total assets of the company as of December 31, 2024, were RMB 28,412,402,000, reflecting growth from RMB 26,573,257,000 in 2023[11] - The total equity attributable to the owners of the parent company as of December 31, 2024, was RMB 22,456,276,000, an increase from RMB 21,289,033,000 in 2023[11] Cash Flow - The net cash flow from operating activities for the year ended December 31, 2024, was RMB 4,587,160, an increase from RMB 3,488,746 in 2023, representing a growth of approximately 31.5%[13] - The net cash flow used in investing activities for 2024 was RMB (8,523,733), compared to RMB (6,476,034) in 2023, indicating an increase in investment outflows of about 31.6%[13] - The net cash flow from financing activities for 2024 was RMB (1,083,680), a decrease from RMB 655,863 in 2023, reflecting a significant shift in financing strategy[13] - The total cash and cash equivalents at the end of 2024 amounted to RMB 3,703,586, down from RMB 8,707,372 at the end of 2023, a decrease of approximately 57.5%[13] - The cash and bank deposits as of December 31, 2024, totaled RMB 23,815.0 million, representing 62% of total assets[90] Research and Development - The company has been focusing on R&D for products such as WPS Office, WPS 365, and WPS AI, indicating a commitment to innovation and market expansion[17] - The company has ongoing research and development in office products and services, including WPS Office, WPS 365, and WPS AI, as well as in gaming services[23] - R&D expenses for 2024 amounted to RMB 3,045.4 million, a 13% increase from the previous year, driven by increased staffing and AI-related investments[77] - R&D expenses for Q4 2024 were RMB 730.4 million, up 7% year-on-year, primarily due to increased staff and AI-related expenditures[63] Market Performance - The revenue from office software and services was RMB 5,121,075 thousand, while revenue from online games and others was RMB 5,196,829 thousand[9] - The revenue from the office software and services business was RMB 5,121.1 million, growing by 12%, while the revenue from online games and other businesses reached RMB 5,196.8 million, significantly increasing by 31%[96] - The number of active devices using WPS Office globally reached 632 million in December 2024, a 6% increase year-on-year[54] - Cumulative paying users reached 41.70 million as of December 31, 2024, marking a 17% year-on-year growth[54] - The revenue from online games and other segments was RMB 1,291.3 million in Q4 2024, a 26% increase year-on-year[60] Corporate Governance and Compliance - The audit committee, consisting of three independent non-executive directors, reviewed the financial statements for the year ending December 31, 2024, and confirmed compliance with applicable accounting standards[107] - The company has adhered to the corporate governance code, except for the requirement to provide monthly updates to the board, opting instead for quarterly reports[109] - Forward-looking statements regarding the company's financial condition and operational performance are subject to inherent risks and uncertainties, which may lead to significant differences from actual results[110] - The company will publish all financial and related information as required by listing rules on the Hong Kong Stock Exchange and its own website at an appropriate time[111] Employee and Workforce - Employee benefits expenses, including salaries and wages, totaled RMB 4,070,898 thousand for 2024, up from RMB 3,765,451 thousand in 2023, reflecting an increase of approximately 8%[26] - The company has increased its workforce to approximately 8,047 full-time employees, up from 7,172 in 2023[101] - The total employee cost for 2024 was approximately RMB 4,070.9 million, compared to RMB 3,765.5 million in 2023[101]

Core Viewpoint - The meeting between Qinghai provincial leaders and Lei Jun, founder of Xiaomi Group and chairman of Kingsoft, emphasizes the commitment to high-quality development and deepening cooperation in green computing and technology innovation [1] Group 1: Government and Corporate Collaboration - Qinghai provincial leaders expressed the desire to enhance investment and cooperation with Xiaomi and Kingsoft, aligning with Xi Jinping's speech on private enterprises [1] - The focus is on integrating regional advantages with corporate strengths to foster mutual benefits [1] Group 2: Industry Development Focus - Lei Jun highlighted Qinghai's significant advantages in clean energy and green computing, indicating a strong potential for growth in these sectors [1] - Kingsoft aims to leverage its innovation and ecosystem integration capabilities to deepen collaboration in artificial intelligence and digital office sectors [1]

Investment Rating - The report maintains a "Buy" rating for Kingsoft Software (3888.HK) [4] Core Views - Kingsoft Software is experiencing positive momentum across its gaming and office software businesses, with significant growth expected in the coming years [3][4] - The gaming segment, particularly the "Jian Wang 3" series, continues to show resilience and profitability, with multiple new games set to launch in 2025 [3][4] - The office software segment is transitioning to a dual subscription model, with the recent launch of WPS AI 2.0 expected to enhance user engagement and revenue [2][3] Summary by Sections 1. Company Overview - Kingsoft Software is one of the earliest software internet companies in China, focusing on gaming and office software, with a balanced revenue contribution from both segments [16][19] 2. Gaming Business - The gaming business is primarily driven by the "Jian Wang" series, which has maintained its appeal over 15 years, with new titles expected to launch in 2025 [3][36] - "Jian Wang 3" has successfully integrated cross-platform data, leading to a significant increase in active users, with 11.46 million monthly active users reported in its first month of open beta for "Jian Wang 3 Wu Jie" [3][49] - The company has five games in its pipeline for 2025, including self-developed and licensed titles, indicating a robust future gaming portfolio [3][68] 3. Office Business - Kingsoft Office is a leading provider of office software in China, with a successful transition to a dual subscription model that has shown positive results [2][74] - The launch of WPS AI 2.0 has introduced new AI tools that enhance user experience and are expected to drive revenue growth in both B2B and B2C segments [2][80] - The company is also expanding its overseas presence, with significant potential for growth in international markets [2][98] 4. Joint Ventures - Kingsoft Cloud is expected to improve its profitability, benefiting from strategic partnerships with Xiaomi and Kingsoft Software, with projected revenue caps for 2025-2027 reaching 113 billion RMB [2][126] - Cheetah Mobile is undergoing a transformation towards AI-driven services, although it remains in a loss-making state in the short term [3][4] 5. Financial Forecast - The report has revised its net profit forecasts for Kingsoft Software for 2024-2026 to 1.52 billion, 2.07 billion, and 2.48 billion RMB, respectively, reflecting a strong growth trajectory [3][135] - Revenue is projected to grow significantly, with a compound annual growth rate (CAGR) of 19.9% expected for 2024 [3][135]

Investment Rating - The report assigns an "Outperform" rating to Kingsoft Software (3888) with a target price of HKD 46.85 per share, based on a 2025 PE of 35x [4][18] Core Views - Kingsoft Software is a leading software and internet service company in China, focusing on interactive entertainment and office software, with cloud services and AI as new directions [14] - The company's revenue has grown steadily from RMB 4.37 billion in 2019 to RMB 8.53 billion in 2023, with a CAGR of 18.20% [15] - The gaming business is strong, with Sword 3 showing resilience and new games like Limit Breaker and Sword Zero expected to contribute to future growth [16] - WPS AI, launched overseas in June 2024, is expected to enhance smart office platforms for 200 million users, with R&D efficiency improved by over 30% and costs reduced by over 35% [17] Financial Performance and Forecast - Revenue is expected to grow from RMB 10.19 billion in 2024 to RMB 14.83 billion in 2026, with a CAGR of 20.8% [4][18] - Net profit is forecasted to increase from RMB 0.87 billion in 2024 to RMB 2.33 billion in 2026, with a CAGR of 41.9% [4][18] - EPS is projected to rise from RMB 0.65 in 2024 to RMB 1.75 in 2026 [4][18] - Gross profit margin is expected to remain stable at around 82.44% to 83.31% from 2024 to 2026 [18] Business Segments - Office software and services revenue is expected to grow from RMB 5.11 billion in 2024 to RMB 7.55 billion in 2026, with a CAGR of 22.93% [18] - Gaming revenue is forecasted to increase from RMB 5.05 billion in 2024 to RMB 7.23 billion in 2026, with a CAGR of 18.80% [18] Strategic Initiatives - Kingsoft Office continues to focus on AI and collaboration, offering an AI office experience and advancing new productivity in the office sector [14] - The company is expanding its gaming portfolio with new titles like Limit Breaker and Sword Zero, which are expected to drive future growth [16] - Collaboration with Amazon Cloud has enhanced WPS AI's capabilities, improving R&D efficiency and reducing costs [17]

Investment Rating - The report maintains a "Buy" rating for Kingsoft Corporation (03888 HK) with a target price of HKD 41 60 per share [5] Core Views - Kingsoft reported strong Q3 2024 results with revenue of RMB 2 91 billion (+41 5% YoY) and operating profit of RMB 1 14 billion (+204% YoY) The operating margin improved to 39 3% (+21 0pct YoY +7 2pct QoQ) Adjusted net profit attributable to shareholders also showed significant growth [2] - The gaming segment contributed RMB 1 71 billion in Q3 2024 (+77 7% YoY +32 8% QoQ) driven by the resilience of "JX3" and the upcoming launch of "Jie Xian Ji" which has garnered global attention with nearly 3 million pre-registrations and a peak ranking of 17th on Steam's wishlist [3] - The office segment generated RMB 1 21 billion in Q3 2024 (+10 5% YoY) with WPS AI features driving C-end subscription revenue growth of 17 2% YoY The B-end business benefited from the recovery in the domestic institutional licensing market and the expansion of SaaS transformation [3] Financial Forecasts - Revenue is projected to grow to RMB 10 37 billion in 2024 and RMB 12 29 billion in 2025 with operating profit expected to reach RMB 3 52 billion and RMB 4 18 billion respectively Net profit attributable to shareholders is forecasted at RMB 1 58 billion in 2024 and RMB 2 21 billion in 2025 [3] - The gaming segment is expected to contribute RMB 5 17 billion in 2024 (+30 0% YoY) while the office segment is projected to generate RMB 5 20 billion (+14 2% YoY) [11] - The company's gross margin is forecasted to remain stable at around 82 9% in 2024 and 83 0% in 2025 with operating margins improving to 34 0% in both years [11] Business Highlights - Gaming: "JX3" continues to show strong performance with the mobile version "JX3 Wujie" exceeding user expectations and driving growth in both mobile and PC revenues New games such as "Jie Xian Ji" "JXQ Zero" and "JX World 4" are expected to launch in 2025 [3] - Office: WPS AI features including AI Docs and WPS Lingxi are enhancing the AI office ecosystem The launch of the WPS HarmonyOS version further supports the development of AI-driven office solutions [3] Valuation - The sum-of-the-parts (SOTP) valuation assigns a 12x PE multiple to the gaming business and a 35x PE multiple to the office business resulting in a fair value of HKD 41 60 per share [3][14]

Investment Rating - Buy (Maintained) [2] Core Views - The company's gaming revenue has consistently exceeded expectations, and the WPS B-end business is showing signs of recovery [6] - The company's 2024Q3 revenue was 2.915 billion yuan, a year-on-year increase of 41.5%, with net profit attributable to the parent company reaching 413 million yuan, significantly surpassing expectations [6] - The gaming business, driven by "JX3," saw a year-on-year increase of 77.7% to 1.71 billion yuan in 2024Q3 [6] - WPS B-end business is expected to recover, with institutional subscription revenue stabilizing and showing a 23.8% quarter-on-quarter increase [6] - The company's 2024-2026 net profit forecasts have been revised upward to 1.796/2.052/2.450 billion yuan, with year-on-year growth rates of 271.5%/14.3%/19.4% respectively [6] Financial Performance - 2024Q3 revenue: 2.915 billion yuan, up 41.5% YoY [6] - 2024Q3 net profit: 413 million yuan, compared to 28.49 million yuan in the same period last year [6] - Gaming revenue in 2024Q3: 1.71 billion yuan, up 77.7% YoY [6] - WPS B-end subscription revenue: Stabilized with a 23.8% quarter-on-quarter increase [6] - 2024-2026 net profit forecasts: 1.796/2.052/2.450 billion yuan, with YoY growth rates of 271.5%/14.3%/19.4% [6] Gaming Business - "JX3" drove a 77.7% YoY increase in gaming revenue to 1.71 billion yuan in 2024Q3 [6] - "JX3 Wujie" achieved full-platform data inheritance and interoperability, with 11.46 million monthly active users in its first month of public testing [6] - New expansion for "JX3" was released in late October 2024, expected to drive continued rapid growth in Q4 [6] - "Jie Xian Ji" began public testing in August 2024, with over 3 million global pre-registrations and ranked 17th on Steam's wishlist [6] WPS Business - WPS B-end business showed signs of recovery, with institutional subscription revenue stabilizing and increasing 23.8% quarter-on-quarter [6] - WPS AI 2.0 enhanced user experience, improving payment stickiness and conversion rates [6] - Institutional authorization revenue increased by 9.0% YoY and 9.4% quarter-on-quarter, indicating recovery in the Xinchuang business [6] - WPS Hongmeng version began public testing in October 2024, expected to drive future growth in the B-end business [6] Valuation Metrics - 2024-2026 diluted EPS: 1.34/1.54/1.83 yuan [6] - 2024-2026 P/E ratios: 22.0/19.3/16.1x [6] - 2024-2026 P/B ratios: 1.7x [6] - 2024-2026 ROE: 9.1%/10.3%/12.3% [6]

Investment Rating - The report maintains a "Buy" rating for Kingsoft Corporation (3888 HK) [1] Core Views - Kingsoft achieved strong revenue growth in Q3 2024, with total revenue reaching RMB 2 915 billion (YoY +41 5%, QoQ +17 8%) and net profit attributable to shareholders of RMB 413 million (YoY +1351 1%, QoQ +5 1%) [1][3] - The company's gaming business showed remarkable growth, with revenue reaching RMB 1 708 billion (YoY +77 7%, QoQ +32 8%), driven by the success of "JX3" and "JX3 Boundless" [3] - Office software and services revenue reached RMB 1 207 billion (YoY +9 9%, QoQ +1 6%), supported by AI-powered product innovations and domestic subscription growth [3] Financial Performance - Gross profit reached RMB 2 454 billion (YoY +46 4%, QoQ +20 2%), with a gross margin of 84 2% (YoY +2 8pct, QoQ +1 7pct) [3] - Operating expenses improved significantly, with sales expense ratio at 12 5% (YoY -8 9pct, QoQ -2 8pct), R&D expense ratio at 29 5% (YoY -3 1pct, QoQ -0 4pct), and administrative expense ratio at 5 7% (YoY -3 4pct, QoQ -0 6pct) [3] - The company's market capitalization stood at HKD 39 013 70 million as of November 19, 2024 [3] Office Software Business - Kingsoft continued to optimize WPS AI, launching WPS AI 2 0 with four new assistants to enhance user experience and subscription conversion [3] - The company expanded its SaaS transformation with WPS 365, targeting large-scale private enterprises and local state-owned enterprises [3] - AI innovations included text companion, AI Docs intelligent document library, and the WPS Lingxi AI assistant, further advancing the AI office ecosystem [3] Gaming Business - "JX3 Boundless" exceeded expectations in terms of returning users, while the annual expansion pack for "JX3" introduced new features that enhanced player engagement [3] - The sci-fi mecha game "JXJ" completed its first public test in August, generating significant global interest with nearly 3 million pre-registrations and ranking 17th on Steam's wishlist [3] - The mobile game "JXQZ Zero" has obtained its license and is planned for release next year [3] Valuation and Forecast - The report raises revenue forecasts for FY2024-2026 to RMB 10 3/11 6/12 8 billion, with net profit attributable to shareholders expected to reach RMB 1 45/1 81/2 05 billion [6] - The target price is set at RMB 36 (HKD 39), based on a SOTP valuation method, implying a target market capitalization of RMB 47 5 billion [6] - The company's PE ratio is projected to be 25/20/18x for FY2024-2026, with EPS of RMB 1 1/1 4/1 5 [6]

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The company reported Q3 2024 revenue of 2.915 billion yuan, a year-over-year increase of 41.52% and a quarter-over-quarter increase of 17.83%, with net profit attributable to shareholders of 413 million yuan, a year-over-year increase of 1351.11% and a quarter-over-quarter increase of 5.11%, exceeding expectations [1][2] Summary by Sections Gaming Business - The gaming segment achieved revenue of 1.708 billion yuan in Q3 2024, representing a year-over-year increase of 77.66% and a quarter-over-quarter increase of 32.81%, accounting for 58.60% of total revenue. The strong performance was driven by the successful launch of "Jian Wang 3: Wujie" mobile game and the 15th anniversary events of "Jian Wang 3," which led to record high daily active users [2] - The company has revised its full-year gaming revenue guidance from over 20% growth to 30% growth, supported by a robust pipeline of new games [2] Office Business - The office segment generated revenue of 1.207 billion yuan in Q3 2024, with a year-over-year increase of 9.88% and a quarter-over-quarter increase of 1.61%, accounting for 41.40% of total revenue. The growth was primarily due to the launch of WPS AI 2.0, which enhanced user engagement and conversion rates [3] - The monthly active users for the main office products reached 618 million, reflecting a year-over-year increase of 4.9% [3] Cost Control and Profitability - The company maintained good cost control, with sales, management, and R&D expenses of 365 million, 166 million, and 861 million yuan respectively. The year-over-year changes were -17.26%, -11.32%, and +28.12% respectively [4] - The company reported a share of losses from joint ventures amounting to 428 million yuan, primarily attributed to long-term asset impairments at a joint venture [4] Earnings Forecast and Valuation - The earnings per share (EPS) estimates for 2024-2026 have been raised to 1.11, 1.38, and 1.68 yuan respectively, with corresponding price-to-earnings (P/E) ratios of 24, 20, and 16 times based on the current stock price. The outlook remains positive due to the strong growth in gaming and the ongoing AI strategy in the office business [5]