Core Viewpoint - In the first half of 2025, despite a general recovery in the gaming sector, Kingsoft's gaming business faced unexpected pressures and challenges, with significant revenue declines in its online gaming segment [1][2][3] Financial Performance - In Q2 2025, Kingsoft's total revenue from online games and other businesses was 952 million yuan, a year-on-year decrease of 26% and a quarter-on-quarter decrease of 8% [1] - For the first half of 2025, this segment's total revenue was 1.988 billion yuan, down 10% compared to the same period in 2024 [1] Product Performance - The new game "Mecha BREAK" did not meet expectations after its launch, contributing to the revenue decline due to high comparative figures from 2024 [1][3] - The classic IP "Jian Wang 3" continued to perform strongly, supported by content updates and technical enhancements, while new titles like "Jian Xia Qing Yuan: Zero" faced challenges [3][4][5] Strategic Focus - Kingsoft's management emphasized a strategy of focusing on high-quality games and deepening IP ecosystem development, while also pursuing global expansion [2][8] - The company is looking to optimize existing products and explore new IP collaborations to find growth opportunities [11] Market Outlook - Kingsoft's gaming business is currently in a phase of short-term pressure but long-term potential, with the second half of 2025 seen as a critical period for validating its long-term operational capabilities [12]

Core Viewpoint - The company is expected to experience a decline in revenue and operating profit in Q2 2025, primarily due to pressures in the gaming sector and increased investments in new games and AI initiatives [1][2]. Revenue Forecast - The company forecasts a revenue of 2.29 billion yuan in Q2 2025, representing a year-on-year decline of 7.5% [1]. - The office business is projected to generate 1.34 billion yuan in revenue, with a year-on-year growth of 13.0% and a quarter-on-quarter growth of 3.1% [1]. - The gaming business is expected to generate 0.945 billion yuan, reflecting a year-on-year decline of 26.5% and a quarter-on-quarter decline of 8.8% [1]. Profitability Analysis - The operating profit is anticipated to be 400 million yuan, with an operating profit margin of 17.5%, down 14.6 percentage points year-on-year and 8.2 percentage points quarter-on-quarter [2]. - The net profit attributable to shareholders is expected to reach 601 million yuan, corresponding to a net profit margin of 26.3%, showing an increase of 10.4 percentage points year-on-year and 14.1 percentage points quarter-on-quarter [2]. Adjustments to Forecasts - The revenue growth forecast for the gaming segment has been revised down from 5% to flat for the year, reflecting cautious assumptions regarding the performance of new and existing games [1][2]. - Revenue forecasts for 2025 and 2026 have been reduced by 2.4% and 3.1% to 11.07 billion yuan and 12.36 billion yuan, respectively [2]. Valuation and Target Price - The target price is maintained at 50 HKD, based on a sum-of-the-parts (SOTP) valuation for 2025, corresponding to a price-to-earnings ratio of 35 times for 2025 [2]. - The company is currently trading at a price-to-earnings ratio of 25.2 times for 2025, indicating a potential upside of 38% [2].

Core Viewpoint - CICC maintains its revenue and net profit forecasts for Kingsoft (03888) for 2025 and 2026, with a target price of HKD 50, indicating a 39% upside potential based on a 2025 P/E ratio of 24.9x [1] Group 1: Office Business - The office business experienced a year-on-year revenue growth of 6%, driven by WPS personal and WPS 365 services, but saw a quarter-on-quarter decline of 13% due to disruptions from new procurement processes for domestic software [2] - As of March 2025, WPS Office's global monthly active devices reached 647 million, with a year-on-year increase of 8%, and the PC version had 301 million monthly active devices, up 11% year-on-year [2] - The management emphasized a core strategy of "AI + collaboration + overseas" for the office business, with a focus on leveraging the user base accumulated in overseas markets since 2018 [2] Group 2: Gaming Business - The gaming business reported a year-on-year revenue increase of 14%, mainly due to contributions from "Jian Wang 3" and the anime game "Chen Bai Jin Qu," but experienced a quarter-on-quarter decline of 20% due to seasonal factors [3] - Upcoming new games include the sci-fi mech game "Jie Xian Ji," expected to launch in summer 2025, and the sequel to the "Jian Xia Qing Yuan" series, which will have a full platform public test on May 29 [3] - Future strategies for the gaming business include adhering to a principle of quality, diversifying game genres beyond martial arts, and exploring international markets [3] Group 3: Financial Performance - In Q1, the operating profit margin was 25.7%, down 2.4 percentage points year-on-year and 13.9 percentage points quarter-on-quarter, primarily due to increased R&D investments in AI and new games [4] - The net profit margin was 12.1%, reflecting a year-on-year decline of 1.2 percentage points and a quarter-on-quarter decline of 4.3 percentage points, mainly due to the drop in operating profit margin [4]

Core Viewpoint - The launch of "Jian Xia Qian Yuan: Zero" marks a significant revival of the classic martial arts gaming experience, inviting players to reconnect with the essence of the martial arts world through innovative gameplay and nostalgic elements [1][21]. Group 1: Game Launch and Promotion - "Jian Xia Qian Yuan: Zero" officially launched on May 29 at 10:00 AM, featuring Li Ruotong as the spokesperson, who embodies the spirit of classic martial arts [3][21]. - The game aims to evoke memories of the martial arts youth, emphasizing themes of brotherhood, faction inheritance, and passionate team battles [3][21]. Group 2: Game Features and Innovations - The game utilizes advanced 3D engines and unique martial arts art styles to create a visually stunning world, replicating classic scenes and incorporating traditional architectural techniques [11]. - A comprehensive character customization system allows players to create unique avatars with 120 adjustable parameters, enhancing personal expression within the game [11]. - The game introduces a large-scale outdoor boss battle system where players must strategize against both the boss and rival factions, promoting teamwork and competition [13]. - An innovative "full freedom trading" system allows players to trade items, equipment, and resources without restrictions, fostering a dynamic in-game economy [15]. - The "smart AI hosting" feature enables players to continue earning experience and rewards while offline, reducing the time commitment typically associated with MMORPGs [17]. Group 3: Player Engagement and Rewards - To celebrate the launch, the game offers a "dual welfare matrix" with various rewards, including cash prizes and exclusive in-game items for players who log in during the promotional period [19]. - The game aims to attract millions of players by providing a rich array of activities and rewards, enhancing player engagement and community building [19].

Core Viewpoint - The mobile game "Jianxia Qingyuan: Zero" will launch on May 29, 2023, aiming to revive the classic martial arts experience for players, featuring traditional gameplay elements and innovative features to enhance player engagement [1][16]. Group 1: Game Features - The game retains the essence of classic martial arts gameplay, focusing on brotherhood and team battles, while reintroducing iconic characters and narratives from the series [3][6]. - It offers a visually stunning experience with advanced 3D graphics and a unique art style, recreating classic locations and allowing for customizable character designs [8]. - The game includes a "no-bind free trading" system, enabling players to trade items without restrictions, thus fostering a player-driven economy [12]. - An innovative "smart AI hosting" system allows players to continue earning rewards while offline, making it accessible for busy individuals [14]. Group 2: Community and Engagement - The game emphasizes community engagement through large-scale battles and cooperative gameplay, allowing players to participate in dynamic events and share in the rewards [10]. - It aims to create a nostalgic yet fresh martial arts world, appealing to both long-time fans and new players [16].