\u3000\u3 Guocheng Mining Co.Ltd(000688) 111 Beijing Kingsoft Office Software Inc(688111) )
The company released the first quarterly report of 2022. During the reporting period, the company realized an operating revenue of 868 million yuan (+ 12.26%); The net profit attributable to the parent company was 251 million yuan (- 18.42%); Deduct non net profit and realize 201 million yuan (- 21.78%). The company’s core subscription business grew rapidly and its profitability improved steadily. It was upgraded to buy rating.
Key points supporting rating
The core business grew rapidly and subscription services continued to advance. During the reporting period, the company’s personal office subscription business and institutional subscription business achieved revenue of 426 million yuan (+ 36.72%) and 145 million yuan (+ 78.72%), accounting for 65.78% of the main business revenue. The company’s main product mad is 572 million (+ 14.86%), the mobile mad is 336 million (+ 14.29%), and the wpspc end mad is 232 million (+ 17.17%). The continuous expansion of the company’s user base and the continuous penetration of the cloud process drive the rapid growth of the core subscription business.
Profitability has recovered steadily. In the first quarter, the gross profit margin of the company was 87% and the net profit margin was 29%. Compared with 2021q4, the gross profit margin increased by 3 percentage points month on month and the net profit margin increased by nearly 8 percentage points month on month. The profitability of the company gradually recovered.
Revenue grew rapidly and continued to increase R & D investment. During the reporting period, the company’s revenue increased by 12.26% year-on-year, and the contract liabilities exceeded 1.8 billion yuan. Net profit attributable to parent company and net profit deducted from non parent company decreased by 18.42% and 21.78% year-on-year. The main reason is that the investment in R & D expenses continues to increase. In the first quarter, the company’s R & D expenditure was 305 million yuan (+ 49.29%), and the proportion of R & D investment in revenue reached 35.19%, an increase of 8.73 percentage points year-on-year. The company’s R & D efforts continue to increase, and its long-term growth can be expected.
Valuation
The adjusted net profit from 2022 to 2024 was 1.346 billion yuan, 1.889 billion yuan and 2.441 billion yuan, EPS was 2.92, 4.10 and 5.30 yuan (fine-tuning 6% – 8%), and the corresponding PE was 55x, 39x and 30x respectively. The company’s core subscription business achieved rapid growth and its leading position was stable, so it was upgraded to buy rating.
Main risks of rating
Revenue growth was lower than expected; Technological breakthrough is less than expected; The demand of Xinchuang is lower than expected.
