Kingsoft Office(688111) ZHESHANG SECURITIES·2024-12-10 08:10Investment Rating - The report maintains a "Buy" rating for Kingsoft Office (688111) with a 2025 PE ratio of 78x, compared to the industry average of 108x [6][74] Core Views - Kingsoft Office is benefiting from the deepening localization of China's IT infrastructure (信创), with WPS gaining market share as domestic operating systems rise [3][22] - The company's institutional business is thriving, with SaaS-based WPS 365 driving growth in enterprise subscriptions, which grew from 13.6% of revenue in 2021 to 21.0% in 2023 [4][44] - AI capabilities, particularly WPS AI 2.0, are enhancing user experience and creating new business opportunities, especially in the enterprise and government sectors [5][64] Market Trends - The domestic IT localization market is expected to grow from 1.43 trillion yuan in 2021 to 2.66 trillion yuan in 2026, with a CAGR of 17.5% [25] - Government policies, including 1 trillion yuan in special bonds and 6 trillion yuan in local debt restructuring, are expected to further support the localization trend [29][30] Product Development - WPS 365, launched in 2023, integrates document processing, AI, and collaboration tools, serving over 18,000 major enterprise clients [40][43] - The company has upgraded WPS AI to version 2.0, offering tailored solutions for personal, enterprise, and government users [64][65] - WPS AI's enterprise version helps companies build private knowledge bases, leveraging internal data assets [69] Financial Projections - Revenue is expected to grow from 52.44 billion yuan in 2024 to 79.25 billion yuan in 2026, with a CAGR of 22.8% [6][73] - Net profit attributable to shareholders is projected to increase from 15.49 billion yuan in 2024 to 23.69 billion yuan in 2026, with a CAGR of 23.8% [6][73] - Institutional subscription revenue is forecasted to grow at a CAGR of 21.2% from 2024 to 2026, reaching 16.87 billion yuan by 2026 [72][73] Competitive Landscape - Kingsoft Office is positioned as a leader in China's office software market, with WPS Office monthly active devices reaching 271 million on PC and 328 million on mobile as of June 2024 [32] - The company's compatibility with domestic CPUs and operating systems gives it an edge in the localization trend [37][38]