Revenue grew steadily, and profits increased. The company released its 2024 quarterly report. 24Q1 achieved operating income of 1,225 million yuan, an increase of 16.54% year on year; net profit to mother was 367 million yuan, up 37.31% year on year; net profit after deducting non-return to mother was 352 million yuan, an increase of 40.56% year on year. The company's sales/management/R&D expense ratios were 17.62%/9.22%/33.03%, down 6.11pct/0.72pct/0.75pct from the previous year. Increased cost control and revenue growth drove up profits.
The C-side and B-side subscription business grew steadily, and Xinchuang improved marginally. The company continues to increase user stickiness and payment conversion through rich membership benefits. The 24Q1 domestic personal office service subscription business revenue was 734 million yuan, up 24.80% year on year. As of March 31, 2024, the number of monthly active devices for the company's main products was 602 million, an increase of 2.21% year on year. Among them, the number of monthly active devices for the WPS Office PC version was 270 million, an increase of 7.14% year on year. In terms of institutional subscription business, the company launched the WPS 365 new office productivity platform. The institutional subscription sales model entered a stage of deep transformation. 24Q1 institutional subscription revenue was 242 million yuan, an increase of 13.57% over the previous year. Driven by the Party, government, and credit innovation and increased purchase orders, the agency's authorized business revenue was 194 million yuan, an increase of 6.31% over the previous year. Overseas business maintained healthy growth. The company shut down domestic advertising in 23Q4, and achieved overseas and other business revenue of 55 million yuan in 24Q1, a year-on-year decrease of 18.44%, mainly due to the base figure for the same period last year.
AI commercialization has begun, and growth can be expected. The company began a grayscale test of the WPS AI membership pricing plan at the end of March 2024. Newly launched AI members and conference members with AI members+super members. Among them, AI members have a continuous monthly subscription of 25 yuan/month and a 12-month package of 248 yuan; conference members have a continuous monthly subscription of 35 yuan/month, and a 12-month package of 348 yuan. We believe that AI fees are expected to drive ARPU values to increase, while AI functions improve office efficiency, and continuous improvement in product power is expected to attract user payment conversion. In addition, the company's B-side AI is also progressing. The company began to co-create and explore B-side application scenarios with customers in 23Q3, and held a press conference on the WPS 365 New Office Productivity Platform on April 9, 2024. At the conference, WPSAI Enterprise Edition composed of AI Hub (Smart Docs), AI Docs (Intelligent Document Library), and Copilot Pro (Enterprise Intelligent Assistant) was released to help enterprises start the AI office era.
Investment advice and profit forecasting. We believe that the company is deeply involved in the office sector, has rich experience in serving C-side and B-side customers, and insists on investing in R&D to continuously improve product capabilities. AI is expected to further open up the company's C-side and B-side business market space. We expect the company's revenue for 2024-2026 to be $57.53/7.46/9.775 billion yuan, up 26.3%/29.8%/30.9% year on year; net profit to mother will be 16.89/22.09 billion yuan, up 28.2%/30.8%/31.1% year on year; EPS will be 3.66/4.78/6.27 yuan, respectively. Combining the company's texture and scarcity, the 2024 dynamic PE was given 100-105 times, and the reasonable value range was 366.00-384.30 yuan, maintaining the “superior to the market” rating.
Risk warning. AI product promotion and iteration fell short of expectations; demand fell short of expectations.