KINGSOFT(03888) 海通国际·2025-01-05 04:19Investment 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]