1 、主要财务指标分析： 2024Q1 实现营业收入21.37 亿元（YoY+8.5%，QoQ-7.5%），其中办公软件及服务业务12.25 亿元（ YoY+16.5% ， QoQ-4.7% ） ， 网络游戏及其他业务9.12 亿元（ YoY-0.8% ， QoQ-11.0% ） 。毛利润17.41 亿元（ YoY+7.1% ，QoQ-8.2%），毛利率81.5%（yoy-1.0pct，qoq-0.6pct）。各项费用率同比持续改善，销售费用率12.2%（yoy-5.6pct，qoq-4.1pct），研发费用率33.4%（yoy-0.2pct，qoq+3.7pct），行政开支费用率7.5%（yoy-0.1pct，qoq+0.1pct）。归母净利润2.85 亿元（YoY+48.0%，QoQ+38.5%)，同环比均进一步提升。Incidents:
On May 22, the company announced its 2024Q1 quarterly report, achieving revenue of 2.137 billion yuan (YoY +8.5%, QoQ -7.5%), operating profit of 602 million yuan, net profit of 522 million yuan, and net profit of 285 million yuan to mother.
Our point of view:
1. Analysis of main financial indicators: 2024Q1 achieved revenue of 2.137 billion yuan (YoY +8.5%, QoQ -7.5%), including office software and service business of 1,225 million yuan (YoY +16.5%, QoQ -4.7%), and online gaming and other businesses of 912 million yuan (YoY -0.8%, QoQ -11.0%). Gross profit of 1,741 billion yuan (YoY +7.1%, QoQ -8.2%), gross profit margin 81.5% (yoy-1.0pct, qoq-0.6pct). Various cost ratios continued to improve year over year, with sales expense ratio 12.2% (yoy-5.6pct, qoq-4.1pct), R&D expense ratio 33.4% (yoy-0.2pct, qoq+3.7pct), administrative expenses ratio 7.5% (yoy-0.1pct, qoq+0.1pct). Net profit attributable to mother was 285 million yuan (YoY +48.0%, QoQ +38.5%), which was a further increase over the same period last year.
2. Office software: 2024Q1 office software and service revenue of 1,225 billion yuan (YoY +16.5%, QoQ -4.7%), mainly driven by the growth of individual subscriptions and institutional subscriptions, which increased 25%/14% year over year, respectively. WPS AI has been steadily commercialized recently. Looking at the structure, the growth of the domestic personal office subscription business is mainly due to the increase in user stickiness and payment conversion, and is driven by rich membership benefits; the growth of the institutional subscription business is mainly due to the launch of WPS 365, a new quality office productivity platform, and Jinshan continues to promote the transformation of the institutional subscription model. In March, WPS AI began initial commercialization. In line with the development trend of cloud, collaboration, and intelligence for enterprises and organizational offices, in April, Jinshan launched an upgraded new quality office productivity platform, WPS 365, which covers upgraded WPS Office, WPS AI Enterprise Edition, and WPS Collaboration to provide users with a one-stop AI office solution, which is expected to drive up payment rates and ARPU.
3. Online games and others: 2024Q1 online games and other revenue of 912 million yuan (YoY -0.8%, QoQ -11.0%). Recently, “Dust and White Forbidden Zone” performed well. During the year, various high-quality products such as “Sword Net 3: Unbounded” and “Unrestricted Machine” were stored. We believe this is expected to drive games to grow by more than 10% throughout the year. The flagship game “Sword Net 3” has maintained steady development, showing resilience and vitality. The mobile version of “Sword Net 3 Unbounded” began multiple rounds of testing, and joint research and refinement with players to continuously improve the quality of the game. The game is expected to be launched in June 2024, and the flagship game “Sword Net 3” will be launched on all platforms. At the same time, the company actively operated the two-dimensional shooter “Dust White Zone”. In the first quarter, the game achieved a significant increase in daily active users and sales volume. The sci-fi mecha game “Unrestricted Machine” received a version number in March 2024, and is being tested and continuously optimized in mainland China and overseas regions.
Profit forecasts and investment ratings consider AI to continue to drive steady growth in the company's office business. The game business has performed well recently, and subsequent product reserves are abundant. We have raised our profit forecast. We expect the company's FY2024-2026 revenue to be 97/108/117 billion yuan, respectively, and net profit to the mother will be 11/14/1.6 billion yuan, respectively. The corresponding EPS is 0.8/1.0/1.2 yuan, and the corresponding PE is 28/23/19x, respectively. We conduct SOTP valuations based on the profitability and competitive landscape of different business segments (with corresponding premiums/discounts). The target market value is $41.2 billion, and the targetPrice is HK$31 and HK$34, maintaining a “buy” rating.
Risks indicate the risk of slowing the growth rate of active users, the risk of AI technology development falling short of expectations, the risk of game version approval, the risk of rapidly increasing content costs, the risk of rapidly increasing channel costs, competition risk, and valuation adjustment risk.