KINGSOFT(03888) 交银国际证券·2024-05-23 06:02Investment Rating - The report upgrades the rating for Kingsoft Corporation (3888 HK) to Buy with a target price of HKD 30 00, implying a potential upside of 17 2% from the current price of HKD 25 60 [1][2][3] Core Views - Q1 2024 Performance: Kingsoft reported Q1 2024 revenue of RMB 2 14 billion, up 8% YoY but 4% below expectations Game revenue declined 1% YoY to RMB 910 million, while WPS revenue grew 17% YoY to RMB 1 23 billion Adjusted operating profit increased 27% YoY to RMB 678 million, 8% above expectations, driven by reduced game marketing expenses [1][2] - Game Business: The game segment saw stable performance with JX Online 3 maintaining steady results and Whiteout Survival showing improved popularity and revenue The new version of Whiteout Survival launched in mid-April is expected to contribute ~15% to Q2 game revenue, with estimated revenue of RMB 100-200 million in the following 30 days [2] - WPS Growth: WPS revenue growth was driven by a 25% YoY increase in personal subscriptions and a 14% YoY increase in institutional subscriptions The launch of WPS 365, an AI-powered productivity platform, is expected to boost subscription revenue with AI-enabled services priced at double the traditional subscription rate [2] - Future Outlook: The report forecasts a 12% growth in game revenue for 2024, up from the previous estimate of 9%, supported by the upcoming launch of JX Online 3: Infinite in June 2024 and the potential of Whiteout Survival and JX Online 3 cross-platform integration [2] Financial Projections - Revenue and Profit: The report slightly adjusts revenue forecasts and raises 2024 net profit estimates by 4% The target price is increased to HKD 30 00, based on a 13x 2024 P/E for the game business (up from 10x) and a 25x P/E for WPS [2] - Valuation: The valuation is supported by the expected double-digit growth in game revenue and the positive impact of Whiteout Survival on Q2 performance [2] Industry Context - The report highlights Kingsoft's position in the gaming and office software sectors, with a focus on the growth potential of its AI-powered WPS platform and the upcoming game releases [2][3]