Revenue growth picked up in the third quarter. The company's revenue for the first three quarters was 3.627 billion yuan (+10.90%), net profit attributable to mother was 1.04 billion yuan (+16.41%), after deducting non-attributable net profit of 0.991 billion yuan (+15.16%). Looking at Q3 alone, the company's revenue was 1.214 billion yuan (+10.53%), net profit attributable to mother 0.318 billion yuan (+8.33%), after deducting non-attributable net profit of 0.303 billion yuan (+6.66%).

Investment in R&D has increased, and contract liabilities and cash flow have increased steadily. The company continued to increase investment in R&D. In the first three quarters, R&D expenses increased by 17.26% year on year, and sales and management expenses decreased by 3.79% and 7.57% year on year.

The company's Q3 cash flow performance was excellent. The Q3 company collected 1.409 billion yuan (+23.60%), and the net cash flow from operating activities was 0.451 billion yuan (+31.10%). The company's contract debt was 1.99 billion yuan (+16.31%), and other non-current liabilities reached 0.712 billion yuan (+74.08%). The long-term development of individual members was smooth.

Individual subscriptions have maintained high growth, and the recovery of Xinchuang and the value of AI are driving growth on both sides of BC. By business, domestic personal subscription revenue was 0.762 billion yuan (+17.24%). Among them, the company WPS AI 2.0 added various features such as AI writing assistants, which strongly promoted user stickiness and payment conversion. Domestic institutional subscription revenue was 0.248 billion yuan (+0.02%); domestic institutions authorized 0.143 billion yuan (+8.97%). The company continued to deploy in the field of party, government, and credit innovation, and related orders increased. International and other business revenue of 0.061 billion yuan (-10.43%) was mainly due to the shutdown of domestic advertising business, and overseas business maintained rapid growth.

As of the end of September '24, the number of monthly active devices for the company's main products was 0.618 billion (+4.92%), of which 0.277 billion (+6.95%) on PC and 0.338 billion (+3.36%) on mobile devices per month.

Document office is the first AI agent implementation scenario, and AI has already generated revenue. In July of this year, the company officially released WPS AI 2.0, which achieved a paradigm revolution in the four dimensions of AI writing assistant, AI reading assistant, AI data assistant, and AI design assistant. Take AI Co-Writing as an example. It is an intelligent writing tool driven by the AI Agent paradigm. It has the ability to independently think and call tools to gradually complete a given goal, which will greatly improve work efficiency. At present, the total number of annual paid users of the company's AI members and conference members has exceeded one million, injecting strong impetus into the development of the domestic personal subscription business.

Risk warning: Xinchuang's business development falls short of expectations; innovative businesses such as collaboration and AI are progressing slowly.

Investment advice: Maintain an “better than the market” rating. Due to the continuing macroeconomic impact on IT spending, we have lowered our performance forecasts. The company's revenue for 2024-2026 is estimated to be 5.114/6.216/7.606 billion yuan, and net profit to mother is 1.506/1.871/2.317 billion yuan (the original forecast was 1.709/2.217/2.839 billion yuan), corresponding to the current PE 90/73/59 times. The company is a leader in AI applications, and AI members have already begun to contribute revenue; in line with the upcoming intensification of the new round of the Xinchuang industry, there is still plenty of room for the industry and the Shenxinchuang market to maintain a “superior to the market” rating.