Kingsoft Office(SH:688111)2025-10-21 13:32Summary of Kingsoft Office (688111 CH) Equity Research Report Company Overview - Company: Kingsoft Office - Ticker: 688111 CH - Sector: Software - Market Cap: CNY 141,524 million (USD 19,866 million) [8][17] Key Industry Insights - Software Localisation: The US software export ban on China is expected to accelerate the localisation of office software, benefiting Kingsoft Office from 2H25 onwards. The Chinese government is promoting Kingsoft's ".wps" format to replace Microsoft's ".doc" format [4][13]. - AI Engagement: Kingsoft Office's AI narrative remains strong, with positive user feedback on WPS AI 3.0 and plans for an AI PC version of WPS Office [5][13]. Financial Performance and Projections - Earnings Growth: Kingsoft Office's earnings growth is anticipated to improve due to accelerated localisation revenue growth and enhanced AI user engagement. The company expects to reverse the decline in WPS software revenue from 1H25 and achieve robust growth from 2H25 to 2027 [3][4]. - Revenue Estimates: The revenue estimates for Kingsoft Office are as follows: - 2024: CNY 5,121 million - 2025: CNY 5,972 million - 2026: CNY 6,809 million - 2027: CNY 7,708 million [14]. - Earnings Per Share (EPS): Projected EPS for the upcoming years: - 2024: CNY 3.56 - 2025: CNY 4.26 - 2026: CNY 5.03 - 2027: CNY 5.95 [9][15]. Investment Thesis - Rating: Maintain Buy with a target price of CNY 353.00, implying a 16% upside from the current share price of CNY 305.55 [6][22]. - Valuation Method: The target price is based on a 24x price-to-sales (PS) multiple using a 2026 revenue estimate of CNY 6.8 billion [6][21]. Risks and Catalysts - Potential Catalysts: - Improved subscription revenue contribution could enhance earnings visibility [29]. - Growth in AI user numbers may boost market sentiment and valuation [29]. - Strong government support for software localisation could drive growth [29]. - Key Risks: - Budget constraints from government entities may weaken localisation demand [29]. - Increased competition in the collaborative office software market could pressure pricing and sales [29]. - Slower conversion rates of paid users could hinder subscription revenue growth [29]. Conclusion Kingsoft Office is positioned to benefit from the ongoing trends in software localisation and AI engagement, with a strong outlook for revenue and earnings growth. The investment thesis remains positive, supported by robust financial projections and strategic government backing.