Results grew steadily for 23 years and maintained momentum in the first quarter. In 2023, the company achieved full-year revenue of 4.556 billion yuan (+17.27%), net profit attributable to mother of 1,318 billion yuan (+17.92%), and net profit of non-return to mother of 1,262 billion yuan (+34.45%). In Q1 '24, the company achieved revenue of 1,225 million yuan (+16.54%), net profit attributable to mother of 367 million yuan (+37.31%), and net profit of 352 million yuan (+40.56%) after deducting non-return to mother.

B/C subscriptions are growing, and the number of users is steadily rising. In 2023, B-side domestic institutional subscription and service revenue totaled 957 million yuan (+38.36%). Among them, revenue in the public cloud service sector grew rapidly, and the number of paying companies increased 83% year-on-year. By the end of 2023, the company's WPS 365 served more than 17,000 leading government and enterprise customers; C-side domestic personal office service subscription business revenue was 2,653 billion yuan (+29.42%).

The annual number of paid users was 35.49 million (+18.43%), and the ARPU value continued to increase. Domestic agencies have authorized business revenue of 655 million yuan (-21.60%); Internet advertising promotion and other business revenue of 288 million yuan (-6.05%). The company officially shut down domestic third-party commercial advertising business in December 2023.

The 24Q1 subscription side continued its steady growth trend. In the first quarter, individual subscriptions amounted to RMB 734 million (+24.80%), institutional subscriptions amounted to RMB 242 million (+13.57%), institutional licenses amounted to RMB 194 million (+6.31%), and international business amounted to RMB 55 million (-18.44%). As of Q1 '24, the main products had monthly activity of 602 million (+2.21%), of which 270 million (+ 7.14%) of the PC version and 329 million monthly mobile activity (-1.50%).

WPS 365 is upgraded, and WPS AI opens up a new space. On April 9, the company held the Jinshan Office Productivity Conference and released WPS 365, a one-stop AI office platform for enterprises, which covered the three sections of WPS Office Suite, WPS AI Enterprise Edition, and WPS Collaboration, and upgraded a number of products for the enterprise side. AI services will be provided to B-side users in 2024. With the development and upgrading of new features in the three segments of WPS AI AI Enterprise Edition, AI Docs, and Copilot Pro, the company is expected to open up new growth space.

Equity incentives closely link the interests of the company and individuals, demonstrating the company's confidence in steady development. The company issued the “2024 Restricted Stock Incentive Plan (Draft) Summary Notice”. It plans to grant no more than 1 million restricted shares to 158 incentive recipients, accounting for about 0.22% of the company's total share capital when the draft incentive plan was announced. At the same time, the maximum value of the institutional subscription business revenue growth rate and overall revenue growth rate for the next three years is used as an attribution condition. Based on the 2023 results, the target revenue growth rate for 2024 is not less than 10%; based on the revenue from the institutional subscription and service business in 2023, the revenue target growth rate is not less than 15%.

Investment advice: Maintain a “buy” rating. Due to the impact of the pace of Shintech's progress, we have slightly lowered our performance forecast. The estimated net profit for 2024-2026 is 1,709/22.17/2,839 billion yuan (the original forecast was 1,729/2,288 billion yuan for 24-25), corresponding to the current PE of 77/60/47 times. Maintaining a “buy” rating, considering that the company's AI products open up new room for growth.

Risk warning: Xinchuang's business development falls short of expectations; innovative businesses such as collaboration and AI are progressing slowly.