The company is rapidly opening up market space for private enterprises, and the potential revenue space for private enterprises is estimated to be 14.99-44.97 billion per year. Judging from the customer structure, in the past, the main focus of the company was central enterprises+government and C-side individual users. In the past two years, the company has actively expanded the private enterprise market, and this year it has achieved good results. The company's products are attractive to private enterprises: in terms of price, the company's products are more cost-effective than Microsoft, Feishu, etc., and can reduce digital construction costs; in terms of product functionality, they combine content creation tools with collaborative office to improve office efficiency through integrated AI. As the company's product strength increases and layout deepens, we expect institutional business to have more room for penetration in private enterprises. According to our 20-60% penetration rate assumption, the number of potential paying users of private enterprises is 39.53-118.59 million/year. The future customer unit price is calculated at 399 yuan/year (the middle price of the company's commercial version), and the potential revenue space for private enterprises is 15.77-47.32 billions/year.

Xinchuang has helped the rapid development of domestic office software, and the potential business space of domestic institutions is estimated at about 20.502 billion yuan/year. The company is gradually expanding the terminal licensing business for individual products for the government and central enterprises to the Jinshan Digital Office Platform subscription business, and the Jinshan Digital Office Platform is expected to enable customers to increase their payment amounts by providing more value-added services, which means that there may be a lot of room for future increases for central state-owned enterprise customers. The Party and Government+ Industry Innovation Market expects the number of forward-paying users to be 51.4575 millions/year. The future customer unit price is calculated at 399 yuan/year (the middle price of the company's commercial version), and the total long-term revenue is expected to bring in about 20.502 billions/year.

The payment rate for C-side users continues to rise, and the potential revenue space for individual businesses is estimated at 10.971 billions/year.

As of the first half of 2024, the company's paid penetration rate of individual users reached 14% (PC penetration rate), and the cumulative number of annual paid users reached 38.15 million. The company's monthly PC activity volume in 2023 is 0.265 billion. Assuming that the payment rate is 30%, the corresponding number of paying users is 79.5 million/year, and the future customer unit price is 138 yuan/year (the middle price of the company's consumer version), the estimated long-term revenue of the individual subscription portion is expected to reach 10.971 billion yuan/year.

Total revenue space: Currently, the share of the company's private enterprises contributing revenue is rapidly increasing. It is expected that in the context of future improvements in relevant policies and the continuous improvement of the company's product strength, the willingness of private enterprises to pay is expected to continue to increase. We anticipate that under the three conditions of prudence, neutrality, and optimism, the payment rate of private enterprises is expected to reach 20%, 40%, and 60%. Under these three assumptions, the company can achieve an annual revenue space of 46.5 billion yuan, 61.5 billion yuan, and 76.4 billion yuan. Currently, the company's net interest rate is around 30% (2024H1 reaches 29.92% per year), and with the company's subscription business transformation strategy to the SaaS model, sales expenses are expected to decrease, and the net interest rate is expected to further increase. We expect to reach 35% in the future; therefore, we estimate that the company's corresponding net profit under the three revenue assumptions is expected to reach 16.26 billion yuan, 21.51 billion yuan, and 26.76 billion yuan.

Profit forecast and investment rating: Maintaining the purchase rating, we believe that the company is a leading manufacturer of office software in China. Against the backdrop of Xinchuang's catalyst and the company's increasing number of individual users, payment penetration rate, and product unit price, the company is rapidly opening up market space for private enterprises, and the performance is expected to continue to grow rapidly. EPS is expected to continue to grow rapidly in 2024-2026. EPS is expected to be 3.31/4.17/5.30 yuan, corresponding PE is 89.20, 70.80, 55.65 times.

Risk factors: 1. Downstream demand risk: The number of individual subscribers has reached a bottleneck, and the growth falls short of expectations; if corporate customers are affected by the environment and the operation is not ideal, and the digital construction budget falls, market demand will be further affected. 2. Policy risks: The progress of the Xinchuang policy fell short of expectations, the informatization budgets of party and government organs and central enterprises were insufficient, and the number of company-related orders was affected and declined. 3. This paper's spatial estimates for Xinchuang business, C-side and B-side business are based on certain assumptions. The measurement results are biased due to factors such as unmet assumptions and poor market development as expected.