\u3000\u3 Guocheng Mining Co.Ltd(000688) 111 Beijing Kingsoft Office Software Inc(688111) )
On April 29, 2022, the company released the performance report for the first quarter of 2022. According to the company’s announcement, in 2022q1, the company achieved a total revenue of 868 million yuan, a year-on-year increase of 12.26% and a month on month decrease of 4.41%; The net profit attributable to the parent company was 251 million yuan, a year-on-year decrease of 18.42% and a month on month increase of 30.05%.
Comments:
The fundamentals are stable, and the subscription business has achieved high growth
In 2022q1, the company’s revenue scale continued to grow positively, with an operating revenue of 868 million yuan, a year-on-year increase of 12.26% and a month on month decrease of 4.41%; Contract liabilities amounted to 1.564 billion yuan, an increase of 143 million yuan over the end of 2021. On the profit side, in 2022q1, the company realized a net profit attributable to the parent company of 251 million yuan, a year-on-year decrease of 18.42% and a month on month increase of 30.05%; The net interest rate was 29.44%, an increase of 7.51 percentage points month on month. With the continuous improvement of the application experience of government and enterprise users in the field of “cloud and collaboration”, the cloud process and penetration rate of customers have been effectively improved. In 2022q1, the revenue of China’s institutional subscription and service business reached 145 million yuan, a year-on-year increase of 78.72%; Meanwhile, with the continuous growth of the number of users, the company’s personal office service subscription business in China achieved a revenue of 426 million yuan in 2022q1, a year-on-year increase of 36.72%.
In the long run, China’s information and innovation industry has entered a period of development. With the support of policies, the market space has expanded significantly, the demand of government and enterprise users has increased significantly, and the orders of the company’s streaming office software products are rich, which has accelerated the penetration of the company’s information and innovation products and driven the authorized business of Chinese institutions to continue to maintain explosive growth. With the gradual emergence of enterprise level user data management needs and industrial digital needs, and the positive promotion of the company’s “multi screen, cloud, content, AI and collaboration” strategy, the company is expected to further open up growth space in the future and maintain high performance growth.
The company’s user base continues to expand, and users’ willingness to pay continues to improve
As of March 31, 2022, the number of monthly active equipment of the company’s main products was 572 million, an increase of 14.86% over the same period of last year. In terms of products, the number of monthly active devices of wpsofficepc version of the company was 232 million, an increase of 17.17% over the same period of last year; The monthly number of active mobile devices was 336 million, an increase of 14.29% over the same period last year; The number of monthly active equipment of other products of the company, such as Kingsoft Ciba, is close to 5 million. The continuous expansion of the company’s user group and the increasing willingness of users to pay will help the company build a wider moat and thicken the company’s profitability.
Domestic substitution logic creates a favorable development window for the company, and government and enterprise procurement accelerates the penetration process of WPS
In the context of domestic substitution, the government supports the development of local software enterprises through policies, funds and other means. At the same time, with the continuous improvement of the performance of the company’s products, the recognition of Chinese users for the company’s products is also increasing, and the company continues to benefit under the promotion of multiple benefits. On the other hand, government and enterprise procurement has also accelerated the penetration process of WPS in the Chinese market, and the market share has been rapidly improved, which will help the company accelerate its development and provide a strong guarantee for the company’s future performance.
In addition, the company took the lead in vigorously distributing mobile end products, taking the mobile end as the traffic entrance, so as to realize the coordinated growth of WPS mobile end and WPS desktop end product users; Relying on Jinshan cloud to actively promote the cloud strategy, it has more data security than overseas enterprises, and is expected to open the company’s second growth curve.
Profit forecast and investment rating
Under the background of domestic substitution, domestic software has ushered in a development window period. At the same time, with the improvement of national copyright awareness and payment ability, China National Software And Service Company Limited(600536) enterprises’ profitability has been further improved. The company actively promotes technological innovation and product innovation, pays close attention to the general trend of office software mobility and cloud, and is expected to maintain rapid growth in the future. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be 1.339 billion yuan, 1.727 billion yuan and 2.231 billion yuan respectively, corresponding to 64.99 times, 50.37 times and 38.99 times of PE, maintaining the “overweight” rating.
Risk factors
Downstream industry fluctuation risk, company development is less than expected, covid-19 epidemic spread
