\u3000\u3 Guocheng Mining Co.Ltd(000688) 111 Beijing Kingsoft Office Software Inc(688111) )
Event: Beijing Kingsoft Office Software Inc(688111) disclosure of 2021 financial report and 2022 equity incentive plan (Draft). The company achieved a year-on-year growth of 3.2 billion yuan and a year-on-year growth of 4.51% in 20207; The net profit attributable to the shareholders of the listed company was 1.041 billion yuan, a year-on-year increase of 18.57%; The net profit after deducting non recurring profits and losses was 840 million yuan, a year-on-year increase of 37.32%. The company plans to grant 1 million restricted shares to 127 key employees at a price of no less than 45.86 yuan / share.
The user growth continues, and the personal subscription business has sufficient stamina. Although the recovery of offline office in 2021 has brought some resistance to the expansion of WPS users, the company has successfully continued the growth momentum of users' willingness to use and pay, making the number of active devices and paying users of the company's main products reach a new high. As of December 31, 2021, the number of monthly active equipment of the company's main products was 544 million, with a year-on-year increase of 14.05%; The cumulative number of annual paid individual users reached 25.37 million, an increase of 29.31% over the same period last year. The growth of paying users made the company's personal subscription business revenue reach 1.465 billion yuan in 2021, with a year-on-year increase of about 44%. Although the conversion rate of paying users is only about 4.66%, it is still about 0.54 percentage points higher than that of the previous year. It is expected that the company is expected to gradually improve the conversion rate by virtue of its advantageous position in the Chinese market, with sufficient business potential.
The institutional business performed well and the R & D investment continued to expand. Benefiting from the further acceptance of cloud office, collaborative office and other modes by users, the company achieved a revenue of 446 million yuan in institutional customer subscription business in 2021, a year-on-year increase of 23.40%. In order to implement the ecological strategy of "multi screen, cloud, content, AI and collaboration", the company continued to increase its R & D investment. In 2021, the company's R & D expenses reached 1.082 billion yuan, a year-on-year increase of 52.15%, and 2811 R & D personnel, a year-on-year increase of nearly 50%. Due to the current repeated epidemic, it is expected that the demand for online office scenarios such as cloud office and collaborative office will continue to be released in the future, and the institutional customer subscription business is expected to gradually become a new growth point of the company.
It is proposed to reissue equity incentive, which may be normalized. The equity incentive plan (Draft) issued by the company this time has low grant price, relatively few grant objects and ordinary performance assessment objectives (about 15% compound growth rate in the next three years). It does not belong to the universal incentive for the company's employees, nor does it pose a clear challenge to the company's future performance growth. Therefore, this round of equity incentive is still the strategic continuation of the company to bind the middle-level core backbone and attract external middle and senior talents. Looking back on the equity incentive plan launched in 2021, we note that the company's equity incentive plan for two consecutive years is relatively similar. We believe that the company may continue to launch similar equity incentive plans in the future as a normalization measure to stabilize the core backbone team and help ensure the company's long-term competitiveness.
Profit forecast and rating. Taking into account the company's dominant position in the domestic office software market and the localization demand brought by the increasing complexity of geopolitics, it is expected that the company will realize an operating revenue of 4.483 billion yuan, 5.866 billion yuan and 7.433 billion yuan respectively from 2022 to 2024, the net profit attributable to the parent company will be 1.434 billion yuan, 1.954 billion yuan and 2.548 billion yuan respectively, and the EPS will be about 311, 4.24 and 5.53 yuan, corresponding to the current share price PE of 62x, 45x and 35x. Give the company a reasonable PE valuation range of 70-80x in 2022, and the corresponding target share price range is about 218249 yuan, maintaining the "recommended" rating.
Risk warning: the demand for new products is less than expected; The technology is not as expected; Expense control is less than expected.
