Financial Performance - In 2024, Kingsoft achieved a total revenue of RMB 10,317.9 million, representing a year-on-year growth of 21%[10]. - Revenue from office software and services reached RMB 5,121.1 million, an increase of 12% compared to the previous year[10]. - Revenue from online games and other businesses surged to RMB 5,196.8 million, marking a significant growth of 31%[10]. - Operating profit for 2024 soared to RMB 3,646.6 million, a remarkable increase of 64%, with an operating margin rising to 35% from 26% in 2023[10]. - The company achieved a net profit of RMB 2,797.1 million for the year, compared to a loss of RMB 5,341.9 million in the previous year[9]. - The gross profit for 2024 was RMB 8,580.5 million, reflecting a 22% increase year-over-year, with a gross margin of 83%[21]. - The profit attributable to the owners of the parent company for 2024 is RMB 1,551.6 million, up from RMB 483.5 million in the previous year[30]. - The profit attributable to the owners of the parent company before share-based payment costs for 2024 is RMB 1,719.6 million, compared to RMB 684.5 million last year[31]. - The net profit margin excluding share-based payment costs for 2024 and 2023 is 17% and 8%, respectively[32]. - The company reported a significant increase in revenue, achieving a total of $1.5 billion for the quarter, representing a 25% year-over-year growth[1]. Research and Development - Research and development costs increased to RMB 3,045.4 million, reflecting the company's commitment to enhancing core capabilities in collaboration and AI[9]. - Research and development costs rose to RMB 3,045.4 million, a 13% increase year-over-year, due to increased staffing and AI-related investments[22]. - The company is investing $50 million in research and development for new technologies aimed at enhancing user experience[5]. - The company aims to deepen the application of AI technology in the office sector and strengthen the capabilities of WPS 365 while expanding globally[12]. Strategic Focus and Market Expansion - Kingsoft's strategic focus includes enhancing its product ecosystem around "multi-screen, cloud, content, collaboration, and AI" to improve market competitiveness[10]. - The company is actively exploring new game categories while deepening its engagement with classic martial arts IPs in the online gaming sector[10]. - The company plans to launch several new games in 2025, including "Jian Xia Qing Yuan: Zero" and a sci-fi mech game "Jie Xian Ji"[12]. - Market expansion plans include entering three new international markets by the end of the fiscal year, targeting a 15% increase in global market share[6]. Corporate Governance - The company is committed to enhancing corporate governance practices to ensure compliance with the applicable codes and regulations[68]. - The board consists of seven members, including one executive director, three non-executive directors, and three independent non-executive directors, ensuring compliance with listing rules[79]. - The board held four meetings and one annual general meeting during the year ending December 31, 2024, with all directors attending all meetings[86]. - The company has established written guidelines to regulate securities trading by employees who may possess unpublished internal information[76]. - The board is responsible for the preparation of financial statements that fairly reflect the group's financial position and performance, ensuring compliance with applicable accounting standards[78]. - The company has implemented a continuous professional development program for all directors to enhance their knowledge and skills[83]. - The board has authorized senior management to conduct daily operations while maintaining oversight of significant decisions affecting the company[77]. - The company has established a board diversity policy, achieving a female representation of 14% on the board and 32% among all employees[90]. Shareholder Communication and Dividends - The proposed final dividend for 2024 is RMB 184.6 million, up from RMB 171.4 million in 2023[9]. - The board considers internal control, risk management, and the company's financial condition when proposing dividends[114]. - Effective communication with shareholders is prioritized, with updates on business operations and financial data available on the company's website[122]. - The company has reviewed its shareholder communication policy and is satisfied with its execution and effectiveness[123]. Employee and Talent Management - The group employed approximately 8,047 full-time employees as of December 31, 2024, up from 7,172 in 2023[144]. - Employee costs, including directors and senior management remuneration, were approximately RMB 4,070.9 million for 2024, compared to RMB 3,765.5 million in 2023[144]. - The company aims to attract, motivate, and retain key talent through a compensation structure that includes base salary, benefits, retirement plans, performance bonuses, and incentive stock options[98]. - The company has established a shorter vesting period for employee participants under the 2024 share plan to enhance flexibility in attracting and retaining talent[99]. Audit and Compliance - The total remuneration paid to the external auditor, Ernst & Young, for audit services was RMB 6.20 million for 2024, down from RMB 6.65 million in 2023, while non-audit services amounted to RMB 2.45 million, compared to RMB 2.60 million in the previous year[111]. - The company’s financial reporting system and internal controls are regularly reviewed for effectiveness and adequacy[96]. - The company has not detected any non-compliance with the established guidelines by employees during the year[76]. Share Option Plans - The 2024 Share Option Plan was approved on May 23, 2024, allowing for the issuance of up to 133,916,711 new shares, which is 10% of the total shares issued as of that date[158]. - The total number of unexercised share rewards under the 2024 Share Option Plan remained at 1,527,400 as of December 31, 2024[159]. - The maximum number of shares that may be issued upon exercise of options under the 2021 Share Option Plan is capped at 10% of the total issued shares as of December 9, 2021, which amounts to 137,020,371 shares[166]. - The company has approved and adopted the 2021, 2022, 2023, and 2024 share incentive plans, with a total of 870,000, 1,000,000, 1,000,000, and 997,000 shares authorized for issuance, respectively, representing approximately 0.19%, 0.22%, 0.22%, and 0.22% of the total issued share capital as of December 31, 2024[178].

Group 1 - Kingsoft Cloud's stock rose over 4%, reaching HKD 7.47 with a trading volume of HKD 240 million [1] - In Q4 2024, Kingsoft Cloud achieved revenue of RMB 2.2 billion, a year-on-year increase of 30%, exceeding expectations; adjusted operating profit was RMB 24.37 million, marking the first positive result with a profit margin of 1.1% [1] - The adjusted net loss for Q4 2024 was RMB 70.3 million, with a loss rate of 3.1%, which was better than expected [1] - For the full year 2024, Kingsoft Cloud's revenue was RMB 7.8 billion, a year-on-year increase of 10.5%, with an adjusted net loss of RMB 830 million, corresponding to a loss rate of 11%, narrowing by 8 percentage points year-on-year [1] Group 2 - In Q4 2024, public cloud service revenue was RMB 1.4 billion, a year-on-year increase of 34%, driven by growth in AI cloud business [1] - AI cloud business revenue in Q4 2024 grew approximately 500% year-on-year to RMB 470 million, achieving triple-digit year-on-year growth for six consecutive quarters [1] - The proportion of AI cloud revenue in public cloud services increased to 34%, up 26 percentage points year-on-year and 3 percentage points quarter-on-quarter, while its share of total revenue rose to 21% [1] Group 3 - Kingsoft Cloud is a core cloud provider for Xiaomi and Kingsoft Software Group, benefiting directly from their increased investment in AI [2] - Revenue from Xiaomi and Kingsoft Software Group grew by 76% year-on-year in Q4 2024 [2] - A strategic framework agreement was renewed with Xiaomi and Kingsoft Software Group, setting annual service caps of RMB 2.8 billion, RMB 3.7 billion, and RMB 4.8 billion for 2025-2027, representing year-on-year growth of 41%, 35%, and 29% respectively [2] - Kingsoft Cloud signed a financing service framework with Xiaomi to ensure capital expenditure [2]

Key Points Summary of Kingsoft Software Conference Call Company Overview - **Company**: Kingsoft Software - **Year**: 2024 - **Total Revenue**: 10.316 billion RMB, a 23% year-on-year increase, marking a historical high [2][5] Financial Performance - **Office Software Revenue**: 5.12 billion RMB, up 12% year-on-year [2][5] - **Online Gaming Revenue**: 5.196 billion RMB, a significant increase of 31% year-on-year [2][5] - **Operating Profit Margin**: 3.65 billion RMB, a 64% increase year-on-year [3][5] - **Net Profit**: 1.55 billion RMB, a remarkable growth of 220% year-on-year [3][5] Business Segments Office Software - **R&D Investment**: Increased focus on AI and collaboration, with the launch of WPS AI 2.0, which includes four components: writing, design, reading, and data [2][6] - **User Engagement**: Aiming to enhance user activity and work efficiency through new features [2][18] - **Overseas Market**: Monthly active users on PC nearing 30 million, with personal product revenue reaching 180 million RMB, a 42% increase [4][20] Online Gaming - **New Game Launch**: "Bottom Line Machine" has over 3 million total testers and 310,000 concurrent users, expected to launch in Q2 [2][7] - **Long-term Product**: "Jian Wang 3" achieved record revenue growth of approximately 20% in 2024, with a stable operation strategy planned for 2025 [2][11] Strategic Focus - **AI Development**: Continued investment in AI technology to enhance product offerings and user experience [6][19] - **Global Expansion**: Plans to increase investment in overseas markets, including R&D and marketing efforts [4][20] - **Shareholder Returns**: Company holds approximately 26.5 billion RMB in cash equivalents, with plans to increase dividends and buybacks when market conditions allow [4][30] Market Position and Competition - **Competitive Landscape**: "Bottom Line Machine" faces competition from titles like "World of Tanks 3" and other similar products [8][10] - **User Growth Strategy**: No perceived ceiling on user numbers in the anime market, with ongoing content updates to maintain engagement [14] Future Outlook - **2025 Projections**: Gaming business expected to see single-digit growth due to high base in 2024; office business guidance not provided but anticipated to perform well [4][15][16] - **AI Integration**: Focus on enhancing AI capabilities in office software, with specific targets for user engagement metrics [18][19] Additional Insights - **Cash Management**: Company maintains a cautious approach to capitalizing expenses, with all costs treated as current expenses [28] - **Cloud Business**: Future funding support for cloud services remains uncertain, with no immediate plans for equity adjustments [34][35] This summary encapsulates the key points from the Kingsoft Software conference call, highlighting the company's financial performance, strategic initiatives, and future outlook across its business segments.

Investment Rating - The investment rating for Kingsoft Corporation (03888.HK) is "Buy" (maintained) [5] Core Views - The gaming business is returning to stable growth, while AI and the benefits from the new infrastructure are expected to drive the growth of WPS. Kingsoft Cloud is benefiting from AI industry trends and the Xiaomi ecosystem, which is expected to continue improving profitability. However, due to the slowdown in gaming business and the lack of acceleration in WPS C-end revenue, the forecast for net profit attributable to shareholders for 2025-2026 has been revised down from 2.05 billion/2.45 billion to 1.86 billion/2.39 billion. A new forecast for 2027 net profit of 2.71 billion is introduced, with year-on-year growth of 20%/28%/14%. The current stock price corresponds to a PE valuation of 25.8/20.1/17.7 times, maintaining the "Buy" rating [5][6][8]. Financial Summary and Valuation Indicators - For 2024, the expected revenue is 11.547 billion, with a year-on-year growth of 11.9%. The net profit is projected to be 1.864 billion, reflecting a year-on-year growth of 20.1%. The gross margin is expected to be 81.7%, and the net margin is projected at 16.1%. The return on equity (ROE) is expected to be 9.4%, with an EPS of 1.396 and a P/E ratio of 25.8 [9]. Gaming Business Performance - In Q4 2024, the gaming business achieved revenue of 1.29 billion, with a year-on-year growth of 26.0% but a quarter-on-quarter decline of 24%. The high base from Q3's 15th anniversary celebration of "Jian Wang 3" and a decrease in the release of some game monetization content contributed to this decline. The number of new users reached a record high, and the IP remains robust. Upcoming games are expected to stabilize the business [6][8]. WPS Business Performance - In Q4 2024, WPS C-end revenue growth slowed, achieving 1.5 billion with a year-on-year growth of 16.8%. Personal subscription revenue grew by 7.6%, while enterprise subscription revenue increased by 27.9%, benefiting from the cyclical recovery of new infrastructure and the SaaS process in the B-end [7][8]. Kingsoft Cloud Performance - Kingsoft Cloud's revenue in Q4 2024 reached 2.23 billion, with a year-on-year growth of 29.6%. AI-related revenue grew approximately 500%, and the company is expected to continue reducing losses in the future [8].

Core Viewpoint - Despite a significant decline in the Hong Kong stock market, some low-priced stocks experienced substantial gains, indicating potential investment opportunities amidst market volatility [1][3]. Group 1: Market Performance - On March 21, the Hong Kong stock market saw major indices decline, with the Hang Seng Index dropping by 2.19% and the Hang Seng Tech Index falling by 3.37% [1]. - Notably, low-priced stocks such as New Yaohai surged, with a peak increase of 162.5% during the trading session [3][5]. Group 2: Company Analysis - New Yaohai, primarily engaged in luxury car distribution, reported a significant revenue decline of 39.66% year-on-year, with a net loss of 563 million HKD for the first half of the fiscal year ending September 30, 2024 [4]. - The company's luxury car sales, including brands like Lamborghini and Bentley, also saw substantial decreases, with Lamborghini sales down by 25.2% and Bentley sales down by 36.2% [4]. Group 3: Analyst Upgrades - Foreign institutions are actively raising target prices for several Chinese assets, including Tencent, China Mobile, and others, indicating a positive outlook for these companies [8][10]. - Nomura upgraded Tencent's target price from 500 HKD to 648 HKD, citing strong performance in gaming and advertising sectors [9]. - UBS raised China Mobile's target price by 14% to 103 HKD, projecting a compound annual growth rate of 5% for net profit from 2024 to 2027 [10].

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]