Kingsoft Office(SH:688111)2025-03-10 03:11Summary of Kingsoft Office (688111 CH) Research Report Company Overview - Company: Kingsoft Office - Ticker: 688111 CH - Sector: Software - Market Cap: CNY 164,664 million (USD 22,603 million) [7][15] Key Financial Highlights - 4Q24 Preliminary Results: - Revenue: CNY 1,494 million, up 16% year-over-year (y-o-y) [19] - Net Profit: CNY 605 million, up 43% y-o-y [19] - Earnings Estimates: - 2025 Revenue: CNY 6,071 million (up 3% from previous estimates) [4][21] - 2025 Net Profit: CNY 2,156 million (up 10% from previous estimates) [4][21] - Target Price: Raised to RMB 388.00 from RMB 318.00, implying a 9% upside [5][29] Core Insights - AI Monetisation: - Enhanced AI capabilities through DeepSeek-R1 are expected to accelerate monetisation efforts [2][3] - Strong demand for AI functions in enterprise software is anticipated to support revenue growth [3][11] - SaaS Transition: - A smoother transition to standard Software as a Service (SaaS) is expected, driven by improved WPS AI functions [2][5] - Localisation Demand: - Increased orders for office software localisation from local government entities are projected, with completion expected by 2027 [3][21] Revenue and Profit Growth - Revenue Growth: - Expected CAGR of 18.4% from 2024 to 2026 [28] - 2026 Revenue Estimate: CNY 7.2 billion [29] - Net Profit Growth: - 2025-26 net profit estimates are 14-15% higher than Wind consensus [2][4] Risks and Challenges - Budget Constraints: - Potential lower-than-expected budgets for office software localisation from government entities could impact demand [36] - Competition: - Increased competition from both internet giants and traditional office software manufacturers may pressure pricing and sales [36] - User Conversion: - Slower-than-expected conversion of individual subscription users could hinder revenue growth [36] Valuation Metrics - Price-to-Sales (PS) Ratio: - Target PS raised to 25x from 21x based on improved revenue growth expectations [5][28] - Earnings Per Share (EPS): - 2025 EPS estimate: CNY 4.67, reflecting a 9.5% increase from previous estimates [8][12] Conclusion - Investment Recommendation: Maintain Buy rating due to expected solid earnings growth and a positive outlook on AI monetisation and software localisation demand [5][11]