\u3000\u3 Guocheng Mining Co.Ltd(000688) 111 Beijing Kingsoft Office Software Inc(688111) )
Event 1: the company released its annual report for 2021. In the whole year of 21, the company achieved a revenue of 3.28 billion, a year-on-year increase of 45.1%. The net profit attributable to the parent company / net profit deducted from non attributable to the parent company was RMB 1.041840 billion, with a year-on-year increase of 18.6% / 37.3%. Single Q4 company achieved a revenue / net profit attributable to the parent company of 907 / 193 million yuan, with a year-on-year increase of 19.8% / – 31.6%. In the 21st year, the revenue performance of C-end / government enterprise end was bright, the cash flow was healthy, and the gross profit margin / net profit margin decreased due to factors such as personnel expansion / amortization of equity incentive / decline of gross profit of C-end subscription, advertising and other businesses.
Event 2: the company issued the 2022 restricted stock incentive plan (Draft), which plans to grant 1 million restricted shares (800000 shares for the first time, 200000 shares reserved; class II restricted shares) to 127 core managers and technical backbones at a price of no less than 45.86 yuan / share, accounting for about 0.22% of the total share capital. The source of the underlying stock involved is the company’s A-share common stock issued to the incentive object or the A-share common stock repurchased by the company from the secondary market.
C-end mad and payment penetration rate exceeded expectations, and the growth rate of cash flow and contract liabilities was healthy: in the whole year of 21, the company achieved a revenue of 3.28 billion, a year-on-year increase of 45.1%. The net profit attributable to the parent company / net profit deducted from non attributable to the parent company was RMB 1.041840 billion, with a year-on-year increase of 18.6% / 37.3%. Single Q4 company achieved revenue / net profit attributable to parent company of 907 / 193 million yuan, with a year-on-year increase of 19.8% / – 31.6%. In the whole year of 21, the operating cash flow was 1.864 billion, a year-on-year increase of + 23%, better than the profit growth rate. 21q4c end mad5 4.4 billion, a year-on-year increase of + 14%, of which the mad at the PC end reached 219 million, a year-on-year increase of + 16%. The cumulative number of annual paid individual users in the whole year reached 25.37 million (year-on-year + 29.3%). While the PC mad continued to maintain considerable growth, the annual cumulative number of paid users / PC mad was about 11.6%, an increase of 0.6pcts compared with the penetration rate of about 11% in 21h1, and the conversion performance of paid users was also marginally improved. At the end of 21q4, the amount of contract liabilities of the company was 1.421 billion, an increase of 71% / 19% respectively on a month on month basis. The healthy growth of contract liabilities will help the company continuously realize its C-end business potential.
The gross profit margin / net profit margin declined due to personnel expansion / amortization of equity incentive and other factors: in the 21st year, the gross profit margin / net profit margin of the company was 86.9% / 31.7% respectively, with a year-on-year decrease of 0.8/7.1pcts. The slight decline in gross profit margin was mainly due to the decline of 2.6/6.2pcts in gross profit of China’s personal subscription business / Internet advertising and other businesses respectively. In the past 21 years, the company’s share based payment expense was about 80 million yuan (accounting for nearly 2.5% of the revenue). When the share based payment was added back, the company’s net interest rate was about 34.1%, down 4.8 PCTs year-on-year. By the end of the 21st century, the total number of employees of the company had reached 4199, with a year-on-year increase of + 49% and a per capita salary of + 5.4%. The expansion of personnel and the rise of salary costs also diluted the company’s profits to a certain extent.
The company issued the 22-year equity incentive plan: the company issued the 2022 restricted stock incentive plan (Draft), which plans to grant 1 million restricted shares (800000 shares for the first time, 200000 shares reserved; class II restricted shares) to a total of 127 core managers and technical backbones at a price of no less than 45.86 yuan / share, accounting for about 0.22% of the total share capital. The source of the underlying stock involved is the company’s A-share common stock issued to the incentive object or the A-share common stock repurchased by the company from the secondary market.
Vesting period arrangement and unlocking conditions: the restricted stock sales periods granted for the first time in this incentive plan are 12 months, 24 months and 36 months respectively from the date of the first grant, and the vesting proportion of the third period is 33% / 33% / 34%. The unlocking conditions of the first grant are as follows: 1) company level: the target of 100% ownership proportion at the level of phase III company is based on the revenue of 21 years, the revenue growth rate of 22 years is not less than 15% / 22, the cumulative revenue growth rate of 23 years is not less than 147.25% / 22, and the cumulative revenue growth rate of 23 and 24 years is not less than 300.66%; The target of 90% ownership ratio is based on the revenue of 21 years, with the revenue growth rate of 22 years not less than 10% / 22, the cumulative revenue growth rate of 23 years not less than 131% / 22, and the cumulative revenue growth rate of 23 and 24 years not less than 264.10%; 2) Individual level: according to the annual individual performance appraisal of the incentive object, it is divided into two levels: up to standard / not up to standard, and the corresponding ownership proportion at the individual level is 100% / 0 respectively. Assuming that the company achieves the bottom line target of 100% ownership at the company level on the average of 22 / 23 / 24, the corresponding year-on-year growth rate of revenue in 22 / 23 / 24 is 15% / 15% / 16%; Assuming that the company achieves the bottom line target of 90% ownership at the company level on 22 / 23 / 24, the corresponding year-on-year growth rate of revenue in 22 / 23 / 24 is 10% / 10% / 10%.
It is estimated that the implementation of restricted shares will affect the operating performance of each period: it is assumed that restricted shares will be granted to the incentive object at the end of May 2022, and the underlying stock price on the grant date is 190.09 yuan (closing price on March 23), and the total amortization expense of the first grant is expected to be about 117.1 million yuan. The amortization expense of each period in 22-25 years is expected to be 4405 / 4886 / 2198 / 6210000 yuan respectively.
It is optimistic that the company’s C-end business will maintain high growth, and the b-end business will open up growth space relying on the digital office platform: according to the caliber of “annual cumulative number of paying users / pc-end mad”, there is still a significant gap between the company’s C-end payment penetration rate of 11.6% and the leading audio-visual software manufacturers with homogeneous user structure (the payment penetration rates of 20q4 Tencent music online music and iqiyi are about 32% / 20% respectively). With the continuous enrichment of the company’s content ecology, the continuous optimization of multi screen experience, the continuous improvement of users’ dependence on cloud storage and other functions and the continuous improvement of collaboration experience, it is optimistic that the company’s C-end business will maintain a high growth. On the market side of government and enterprises, the company launched Jinshan digital office platform at the end of the 21st year, which comprehensively enables the digital transformation of large organizations and improves organizational efficiency. Relying on the technical advantages of end cloud integrated products, the platform helps various government departments and customers in finance, energy, operators, construction, metallurgy, people’s livelihood and other industries to carry out digital transformation through a number of practical business scene functions such as document life cycle management and middle platform empowerment. As an interactive hub of office digital transformation, Jinshan digital office platform can support large and super large organizations including the government, state-owned enterprises, central enterprises and large-scale private enterprises, establish an exclusive digital office platform, and provide one-stop office cloud services to small and medium-sized enterprises and organizations. The platform includes providing users with wpsoffice office software, Jinshan document and office capability product matrix with Jinshan collaboration (enterprise IM) as the core, and empowering users through unified identity authentication service, supporting documents and collaboration, two digital office platforms and open ecosystem. In the face of user demand scenarios, it provides three enabling schemes: full set of platform, module combination and capability embedding, creates four delivery modes based on public cloud, hybrid cloud, privatization and full information creation environment, and effectively solves the three core pain points of “easy disclosure of information, high self construction cost of platform and weak openness of existing products” in organizing digital office. It is optimistic that the company will further open the business growth space of government and enterprise based on the digital office platform.
Continue to be optimistic about the company’s business prospects and maintain the “buy” rating: it is estimated that the company’s net profit attributable to the parent company from 2022 to 2024 will be RMB 1.311/17.73/2.402 billion respectively, and the corresponding EPS will be RMB 2.84/3.85/5.21 respectively. Give the company 85-90x target P / E in 2022, corresponding to the target price of 241.72-255.94 yuan.
Risk warning: the implementation time of the party, government, army and industry information and innovation policies is not as expected; The mad and payment penetration of C-end subscription service are lower than expected; The development of institutional subscription business is less than expected; Industry competition intensifies.
