KINGSOFT(HK:03888) GF SECURITIES·2024-05-24 08:02Investment Rating - The investment rating for the company is "Buy" with a current price of 25.95 HKD and a target value of 38.73 HKD [1][4]. Core Insights - The company reported a year-on-year revenue increase of 8.5% and a significant rise in net profit to 2.85 billion RMB, driven by a decrease in sales expense ratio and reduced losses from Kingsoft Cloud [1][3]. - The gaming segment showed stable performance with "Jian Wang 3" maintaining its position, while "Chen Bai Jin Qu" exceeded expectations [1][4]. - The office software segment is expected to benefit from AI commercialization and an upgraded membership system, leading to an increase in average revenue per user (ARPU) and paid user numbers [1][3]. Revenue and Profit Forecast - The company forecasts total revenue of 100.69 billion RMB and net profit of 10.57 billion RMB for 2024, with a projected revenue growth of approximately 10% for the gaming business and significant growth in the office segment [1][4]. - The expected revenue for 2025 is 123.21 billion RMB, with net profit anticipated to reach 14.18 billion RMB [1][4]. Business Segmentation - The gaming segment is projected to generate 4.395 billion RMB in revenue for 2024, while the office segment is expected to reach 5.674 billion RMB [3][6]. - The gaming segment's revenue contribution is expected to decline from 49.1% in 2022 to 42.7% in 2024, while the office segment's contribution will increase from 50.9% to 57.3% in the same period [3][4]. Financial Ratios - The company is expected to maintain a gross margin of around 82% over the next few years, with a projected operating margin of 24.9% for 2024 [4][8]. - The net profit margin is forecasted to improve significantly from -79.2% in 2022 to 10.5% in 2024 [4][8]. Valuation Metrics - The company is valued at a price-to-earnings (P/E) ratio of 10x for the gaming segment and 40x for the office segment, with a total valuation of approximately 47.94 billion RMB [6][7]. - The estimated fair value per share is 38.73 HKD, based on a sum-of-the-parts (SOTP) valuation approach [6][7].