\u3000\u3 Guocheng Mining Co.Ltd(000688) 111 Beijing Kingsoft Office Software Inc(688111) )
Matters:
The company announced that in the first quarter report of 2022, the operating revenue in the first quarter of 2022 was 868 million yuan, a year-on-year increase of 12.26%, and the net profit attributable to the parent company was 251 million yuan, a year-on-year decrease of 18.42%, and EPS was 0.544 yuan.
Ping An View:
The company’s revenue increased steadily in the first quarter of 2022. In the first quarter of 2022, the company’s operating revenue was 868 million yuan, with a year-on-year increase of 12.26%, and the revenue achieved steady growth. Among them, China’s personal office service subscription business realized a revenue of 426 million yuan, a year-on-year increase of 36.72%; China’s institutional subscription and service business realized a revenue of 145 million yuan, a year-on-year increase of 78.72%; The revenue from authorized business of Chinese institutions reached 232 million yuan, a year-on-year decrease of 10.84%; Internet advertising promotion services and other businesses achieved a revenue of 65.12 million yuan, a year-on-year decrease of 45.88%. The net profit attributable to the parent company was 251 million yuan, a year-on-year decrease of 18.42%.
The gross profit margin of the company decreased year-on-year, the expense rate increased year-on-year, and the R & D investment continued to increase significantly. The gross profit margin of the company in the first quarter of 2022 was 86.53%, a year-on-year decrease of 3.21 percentage points, an increase of 3.08 percentage points compared with the fourth quarter of 2021, and the profitability gradually recovered compared with the fourth quarter of 2021. During the first quarter of 2022, the company’s expense rate was 65.97%, a year-on-year increase of 13.05 percentage points, mainly because the R & D expense rate increased by 8.73 percentage points year-on-year. Adhering to the concept of “building a business through technology”, the company continues to strengthen R & D investment. In the first quarter of 2022, the company’s R & D investment was 305 million yuan (the company’s R & D investment in the current period was fully expensed), with a year-on-year increase of 49.29%, and the revenue of R & D investment accounted for 35.19%.
The company’s subscription business is outstanding. The company’s subscription business includes China’s personal office service subscription business and China’s institutional subscription and service business. In the first quarter of 2022, these two subscription businesses increased by 36.72% and 78.72% respectively year-on-year, both achieving rapid growth and outstanding performance; The total revenue of these two subscription businesses accounted for 65.74%, which was further increased compared with the whole year of 2021. Subscription business has become the main source of the company’s revenue. In terms of monthly active equipment index, as of March 31, 2022, the monthly active equipment of the company’s main products was 572 million, an increase of 14.86% over the same period of last year. Among them, the number of WPS office PC monthly active devices 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 continuous growth in the number of WPS office monthly active devices of the company provides strong support for the continuous and rapid growth of the company’s subscription business, especially the subscription business of personal office services in China.
Profit forecast and investment suggestion: we maintain the profit forecast of the company from 2022 to 2024. EPS is 3.06 yuan, 4.08 yuan and 5.36 yuan respectively, and PE corresponding to the closing price on April 29 is about 61.7, 46.2 and 35.2 times respectively. With excellent quality and years of unremitting R & D investment, the company has formed a deep moat, which is unique in domestic basic office software. At present, the company’s subscription business has a good momentum of development and has become the main source of the company’s revenue. The development of the company’s authorization business and subscription business opens up growth space for the company. We are optimistic about the future development of the company and maintain the “recommended” rating of the company.
Risk tips: (1) the process of software legalization is slow. Intellectual property protection and the resulting software legalization is an important driving force for the promotion and Realization of the company’s products. If China National Software And Service Company Limited(600536) legalization is promoted slowly, it will affect the growth performance of the company. (2) The willingness to pay increased slowly. At present, China’s recognition of software value is still not high. If this situation continues for a long time and the willingness to pay increases slowly, it will affect the payment conversion and profit release of the company’s products and services. (3) The increase of ARPU value of members was lower than expected. The members of the company’s personal office subscription business are mainly divided into WPS members (including super members) and rice husk members. If the user acceptance of the value-added service products provided by the company to its members is lower than expected, there will be a risk that the ARPU value of the company’s subscription business will be lower than expected.
