Incident: Recently, Jinshan Office released its 2024 three-quarter report. The company achieved cumulative operating income of 3.627 billion yuan in the first three quarters, an increase of 10.90% over the previous year; cumulative net profit to mother was 1.04 billion yuan, an increase of 16.41% over the previous year. In the third quarter of 2024, the company achieved operating income of 1.214 billion yuan, an increase of 10.53% year on year; net profit to mother was 0.319 billion yuan, an increase of 8.33% year on year.

In the third quarter of 2024, personal office service subscriptions grew steadily, and contract debt reached a record high.

1) Domestic personal office service subscription business: achieved revenue of 0.76 billion yuan, an increase of 17.24% over the previous year; mainly the company WPS AI 2.0 added AI writing assistants, AI reading assistants, AI data assistants, and AI design assistants to provide users with a more convenient and efficient creative experience, strongly promoting user stickiness and payment conversion, and driving steady growth in the domestic personal office service subscription business.

2) Domestic institutional subscription and service business: achieved revenue of 0.248 billion yuan, an increase of 0.02% over the previous year; mainly based on the more complete WPS 365, the company invigorated large-scale private enterprises and local state-owned enterprises in the public cloud market, continuously increased the share of related revenue, promoted further upgrading of revenue models, and laid a solid foundation for the long-term healthy development of domestic institutional subscription business.

3) Domestic institutional licensing business: Achieved revenue of 0.143 billion yuan, an increase of 8.97% over the previous year; the main reason is that the company continues to closely track policy changes and customer needs, fully lays out the sinking market in the field of party, government, and credit innovation. Increased related orders drive domestic institutional licensing business to grow.

4) International and other businesses: Achieved revenue of 0.06 billion yuan, a year-on-year decrease of 10.43%; mainly domestic third-party commercial advertising business was shut down this year. Revenue changes were mainly affected by the base for the same period last year, and the company's overseas business maintained rapid growth.

With 2024Q3, the company's contract debt reached 1.99 billion yuan, a record high, up 4.6%/16.3% month-on-month compared to 1.903 billion yuan/1.711 billion yuan in 2024Q2/2023Q3.

The monthly activity data for the company's main products is growing steadily, and the Hongmeng version of the WPS public beta in October 2024 is expected to further increase the product penetration rate. As of September 30, 2024, the number of monthly active devices for the company's main products was 0.618 billion, an increase of 4.92% over the previous year. Among them, the number of monthly active devices on the PC version of WPS Office was 0.277 billion, up 6.95% year on year; the number of monthly active devices on the mobile version was 0.338 billion, up 3.36% year on year. The public beta of the WPS Hongmeng version in October 2024 enabled cross-device and cross-device document and data sharing, and supports multi-user collaboration, browsing, editing, and revision capabilities.

Investment advice: The number of individual subscription paying users of Jinshan Office and ARUP is expected to continue to grow with AI. At the same time, the launch of WPS 365 is expected to accelerate institutional subscription transformation. We predict that the company's revenue for 2024-2026 will be 5.143, 6.341, and 7.982 billion yuan, respectively; EPS will be 3.25, 4.09, and 5.18 yuan, respectively. The corresponding PE price on October 25, 2024 will be 81X, 65X, and 51X, respectively, maintaining the “recommended” rating.

Risk warning: Technology research and development falls short of expectations; industry competition intensifies.