Key points of investment
2024Q1 Revenue grew steadily, and the profit side exceeded expectations
Steady revenue growth in the first quarter: 2024Q1 achieved revenue of 1,225 billion yuan, an increase of 16.54% year over year, continuing the previous growth trend. The profit side achieved high growth. Net profit to mother was 367 million yuan, an increase of 37.31% year on year, and net profit after deducting non-return to mother was 352 million yuan, an increase of 40.56% year on year.
Profit side growth exceeded expectations, mainly due to the good cost control effect. The 2024Q1 sales/management/R&D expense ratio was 17.62%/9.22%/33.03%, the sales expense ratio decreased by 6.11 pcts year on year, the management expense ratio decreased by 0.72 pcts year on year, and the R&D cost ratio increased by 0.75 pcts year on year.
The licensing business resumed growth. Looking at the PC monthly active equipment growth rate, personal subscription revenue was 734 million yuan, up 24.80% year on year, institutional subscription revenue was 242 million yuan, up 13.57% year on year, institutional license revenue was 194 million yuan, up 6.31% year on year, and international and other business was 55 million yuan, down 18.44% year on year.
The subscription business grew steadily, and the institutional licensing business picked up. In the past two years, due to the lag in the pace of Xinchuang, the growth rate of institutional licensing business has been negative, and 2024Q1 has resumed positive growth.
The number of monthly active devices for major products was 602 million, an increase of 2.21% over the previous year, surpassing 600 million for the first time. Among them, the number of monthly active devices in the PC version of WPS Office was 270 million, +7.14% year on year. This is the highest growth rate in the past 2 years. The number of monthly active mobile devices was 329 million, or 1.50% YoY.
C-side AI products began commercialization. B-side released WPS AI Enterprise Edition on March 25, WPS AI released product pricing on the C-side, began grayscale testing, and commercialization of products officially began. The original membership system is being upgraded again. WPS AI membership is priced at 248 yuan/year (discounted price 188 yuan/year), and WPS membership is priced at 348 yuan/year (discounted price 268 yuan/year).
On April 9, the company released WPSAI Enterprise Edition to create a “corporate brain” for customers. WPSAI Enterprise Edition creates an “enterprise brain” for customers and is divided into three parts: AIHub (smart dock), AIDocs (intelligent document library), and CoPilotPro (intelligent enterprise assistant). AIHub lowers the threshold for enterprises to deploy large models, and AIDocs solves the pain points of user digital asset management; CoPilotPro can automate tasks and optimize user workflows through natural language.
The commercialization of WPS AI on the C-side and B-side is accelerating, and is expected to bring new growth impetus to personal and institutional subscription businesses.
Profit forecasting and valuation
The company's business base is stable, and AI is expected to open up room for growth. It is estimated that in 2024-2026, the company's revenue will be 57.76/75.84/9.752 billion yuan, up 26.79%/31.29%/28.59% year on year, and net profit to mother will be 16.81/22.10/2,859 billion yuan, with a growth rate of 27.60%/31.43%/29.38%. EPS was 3.64/4.79/6.19 yuan, maintaining a “buy” rating.
Risk warning
The promotion of the new membership system falls short of expectations, AI product development and implementation falls short of expectations, downstream customer IT expenses fall short of expectations, and market competition increases risks