Jinshan Office 2024 Q1-Q3 revenue of 3.627 billion yuan (yoy +10.90%), net profit of 1.04 billion yuan (yoy +16.41%), net profit of 0.991 billion yuan (yoy +15.16%); net operating cash flow of 1.079 billion yuan, +14.92% year-on-year; of which Q3 revenue was 1.214 billion yuan (yoy +10.53%, qoq +2.20%), net profit to mother 0.318 billion yuan (yoy +8.33%, qoq -10.15%) The 24Q3 company's revenue and profit grew steadily year on year, and the user base expanded at an accelerated pace. We are optimistic that in the future, with the deepening of 2B cloud and the commercialization of AI, the company's revenue will accelerate growth and maintain a “buy” rating.

2C: Accelerated expansion of the user base, AI iteration or boosting user stickiness and conversion rate 24Q1-Q3 domestic personal office service subscription revenue was 2.292 billion yuan, up 20.5%, of which 24Q3 single quarter revenue was 0.762 billion yuan, an increase of 17.2%, and continued to grow rapidly; by the end of 24Q3, the company's main products had 0.618 billion monthly active devices, an increase of 4.9%. The growth rate was 1.8 pct higher than 24Q2, and the user base expanded at an accelerated pace; the company continued to promote AI products Iterative, WPS AI 2.0 adds AI writing/reading/data/design assistants. As AI functions continue to be updated, user stickiness and payment conversion or further increase, the domestic personal office service subscription business is expected to grow steadily.

2B: Boosting the public cloud market, the growth rate is expected to gradually pick up the 24Q1-Q3 domestic institutional subscription and service revenue of 0.691 billion yuan, an increase of 3.7%. Of these, 24Q3 revenue in a single quarter was 0.248 billion yuan, an increase of 0.02%. In 2024, the company launched a new version of WPS 365, while actively promoting cloud transformation and boosting large-scale private enterprises and local state-owned enterprises in the public cloud market. The revenue growth rate is expected to gradually accelerate in the future as cloud transformation deepens; 24Q1-Q3 domestic institutions authorized revenue of 0.467 billion yuan, a decrease of 5.1%; 24Q3 revenue in a single quarter was 0.143 billion yuan, an increase of 9.0%. The company fully lays out the sinking market in the field of party, government, and credit innovation, and is expected to benefit from the promotion of the Xinchuang market policy. The 24Q3 revenue from international and other businesses was 0.061 billion yuan, down 10.4%, mainly due to the shutdown of the advertising business.

Increased investment in R&D to actively seize opportunities in generative AI

24Q1-Q3's sales/management/R&D expenses rate was 18.93%/8.65%/34.78%, -2.89pct/-1.73pct/+1.88pct year-on-year. Among them, the 24Q3 single quarter sales/management/R&D expense ratio was 20.14%/7.85%/37.41%, compared to -1.53pct/-4.14pct/+4.73pct. The company actively grasped the opportunities of generative AI and continued to increase R&D investment. We are optimistic about the gradual commercialization of the company's AI technology in the future to accelerate revenue growth.

Profit forecasting and valuation

Considering that the restoration of institutional authorization fell short of previous expectations and lowered profit forecasts, we expect the company's EPS for 2024-2026 to be 3.24, 3.95, and 5.09 yuan (previous values of 3.32, 4.09, and 5.21 yuan), respectively. Comparatively, the company's 2025 Wind unanimously expected an average PS value of 16.1 times. Considering the rapid iteration of the company's AI products, it was given 26.0 times PS in 2025, with a target price of 351.05 yuan (previous value 252.33 yuan), and a “purchase”.

Risk warning: Paying user growth falls short of expectations, and AI commercialization falls short of expectations.