KINGSOFT(HK:03888) Guohai Securities·2024-03-25 16:00Investment Rating - The report maintains a "Buy" rating for the company [1][20]. Core Insights - The company is expected to benefit from the commercialization of WPS AI and the upcoming launch of "Jian Wang 3 Wu Jie" [1][20]. - The financial performance for Q4 2023 shows a revenue of 23.10 billion RMB, a year-over-year increase of 9.4%, and a quarter-over-quarter increase of 12.2% [5][10]. - The report forecasts revenue growth for FY2024-2026, with expected revenues of 94 billion, 106 billion, and 114 billion RMB respectively, and net profits of 10 billion, 12 billion, and 15 billion RMB [20]. Financial Performance Summary - Q4 2023 Financial Metrics: - Revenue: 23.10 billion RMB (YoY +9.4%, QoQ +12.2%) - Operating Profit: 7.15 billion RMB - Net Profit: 4.38 billion RMB - Net Profit Attributable to Parent: 2.05 billion RMB [5][10]. - Revenue Breakdown: - Office Software and Services: 12.86 billion RMB (YoY +18%, QoQ +17%) - Online Games and Others: 10.24 billion RMB (YoY +0.2%, QoQ +6.6%) [6][19]. - Profitability Metrics: - Gross Margin: 82.1% (YoY -0.3pct, QoQ +0.7pct) - Operating Margin: 30.9% (YoY +1.7pct, QoQ +12.7pct) - Net Margin: 18.9% (YoY +7.6pct, QoQ +10.6pct) [12][14]. Business Segment Analysis - Office Software: - Revenue growth driven by personal and institutional subscriptions, with a focus on enhanced member benefits and digital transformation needs [14][15]. - The launch of WPS AI is expected to boost user engagement and conversion rates [14][15]. - Online Games: - Revenue growth attributed to the success of "Jian Xia World: Origin" and upcoming titles like "Jian Wang 3 Wu Jie" [19][20]. - The flagship game "Jian Wang 3" continues to perform well, contributing to stable revenue streams [19]. Earnings Forecast and Valuation - The report projects earnings per share (EPS) of 0.7, 0.9, and 1.1 RMB for FY2024-2026, with corresponding price-to-earnings (P/E) ratios of 31, 25, and 21 [20]. - The target market capitalization is estimated at 399 billion RMB, with a target price of 30 and 33 HKD [20].