Jingwu Finance | According to a research report from Kaiyuan Securities, Kingsoft (03888) office software business revenue in Q3 2024 grew by 12.5% year-on-year, with the number of monthly active users of key products increasing by 4.9% year-on-year, accelerating quarter-on-quarter. Among these, individual subscription revenue grew by 17.2% year-on-year, and WPS AI 2.0 provided a more convenient creation experience, enhancing paid user stickiness and conversion rates; institutional subscription revenue remained stable year-on-year and increased by 23.8% quarter-on-quarter. The firm estimated that the impact of the subscription model change (from annual billing to monthly billing) has clearly diminished, while the company actively expands into state-owned and private enterprises markets, leading to a continuous increase in contract liabilities, rising by 3.2% quarter-on-quarter. Institutional authorized business revenue increased by 9.0% year-on-year and 9.4% quarter-on-quarter. The Xinchuan business shows some signs of recovery, and with the promotion of debt-clearing policies, localization trends, and the empowerment of the Hongmeng ecosystem (public testing of WPS Hongmeng version starts in October), both the Xinchuan and overall B-end business still have growth potential in the future.
The firm indicated that the new expansion pack for "Jian Wang 3" will be released at the end of October, and it is expected that the company's gaming business will continue to grow rapidly year-on-year in Q4 2024; in August, "Jie Xian Ji" began public testing (with global pre-registration exceeding 3 million and reaching 17th on the Steam wishlist), in conjunction with potential game reserves, which is expected to boost growth potential in 2025.
The firm stated that based on the company's gaming revenue growth consistently exceeding expectations, signs of recovery in B-end office software, Kingsoft Cloud benefiting from the Xiaomi ecosystem and AI-driven revenue acceleration, and the future net loss amount likely to narrow, the firm's net income forecasts for 2024-2026 have been adjusted from 12.28/14.12/18.02 billion yuan to 1.796/2.052/2.45 billion yuan, with year-on-year growth rates of 271.5%/14.3%/19.4%, corresponding to diluted EPS of 1.34/1.54/1.83 yuan for 2024-2026, with the current stock price corresponding to 22.0/19.3/16.1 times PE for 2024-2026. The gaming business in Q4 2024 continues to rise, and WPS C-end maintains steady growth, with AI + Xinchuan + Hongmeng driving the recovery of B-end business. Kingsoft Cloud benefiting from the Xiaomi ecosystem and AI is expected to boost its valuation, maintaining a "buy" rating.
