Key Points Industry and Company Involved - Industry: Cloud Computing, AI Applications - Company: Kingsoft Cloud (KSC), Kingsoft Corporation (KS) Core Views and Arguments - KSC Growth: KSC's revenue growth has been robust from 2019 to 2021. However, in 2022, annual revenue decreased by approximately 10%. Despite this, gross margin improved significantly, with adjusted EBITDA margin rising from a loss of 8.6% in Q2 2022 to a positive 9.8% [doc 2][doc 4]. - KSC Revenue Projections: KSC's revenue from Kingsoft Software and Xiaomi is expected to grow significantly, with a projected annual growth rate of nearly threefold from 2024 to 2026 [doc 5][doc 6]. - KSC Valuation: The target market capitalization for KSC is estimated at around 300 billion HKD [doc 7]. - KS Financials: KS's revenue for the first three quarters of 2023 was 29 billion RMB, a 40% increase year-on-year. Profit increased by 200% to 11.5 billion RMB [doc 9][doc 10]. - KS Valuation: The total valuation of KS, including the equity value of KSC and Kingsoft Office, could reach 1300-1400 billion RMB under an optimistic scenario [doc 11]. Other Important Points - KSC's AI Business: KSC's AI business revenue is expected to be significant by the third quarter of 2023 [doc 4]. - KSC's Cloud Service Contracts: KSC has cloud service contracts with Kingsoft Software and Xiaomi, with revenue ceilings of 4.7 billion, 6 billion, and 7.8 billion RMB for 2024, 2025, and 2026 respectively [doc 5]. - KS's Game Business: KS's game business, including West Mountain Games and Kingsoft Office, has seen significant growth, with revenue from games increasing by 77% year-on-year and 32% sequentially [doc 9][doc 10]. - KS's Equity Value: The equity value of KS, including the equity value of KSC and Kingsoft Office, is estimated at around 800 billion RMB [doc 11]. - KS's Cash Position: KS has a cash position of over 240 billion RMB [doc 11]. Recommendations - KSC: KSC is recommended for investment, with a target market capitalization of around 300 billion HKD [doc 7]. - KS: KS is recommended for investment, with a total valuation of 1300-1400 billion RMB under an optimistic scenario [doc 11]. - Kingsoft Office: Kingsoft Office is a core AI application investment target in A-share [doc 13].
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