In 2024, Kingsoft Office will achieve revenue of 5.121 billion yuan (YOY+12.40%), net profit attributable to the parent company of 1.645 billion yuan (YOY+24.84%), and non-net profit of 1.556 billion yuan (YOY+23.30%). Among them, Q4 achieved revenue of 1.494 billion yuan (yoy + 16.21%), and net profit attributable to the parent company was 605 million yuan (yoy + 42.58%). The company's annual report performance exceeded our expectations (expected revenue of 5.104 billion yuan and net profit attributable to the parent company of 1.499 billion yuan), mainly due to the unexpected growth of WPS personal business and WPS 365 business. We believe that under the AI strategy, the company's products are expected to accelerate the commercialization by virtue of their advantageous card positions, and maintain a "buy" rating.

Benefiting from AI, WPS personal business & WPS 365 business grew strongly, the company's annual report readjusted the revenue disclosure caliber, divided into four categories: WPS personal business, WPS 365 business, WPS software business, and other businesses, with corresponding revenues of 32.83, 4.37, 12.68, and 132 million yuan respectively in 24 years (yoy +18%/+149%/-8.56%/-37.17%). The strong growth of WPS's personal business and 365 business was mainly due to the effective promotion of the AI strategy. For individual users, the company launched WPSAI office assistant, and for WPS 365 customers, the company launched WPS AI Enterprise Edition and Government Edition. We believe that refined AI capabilities for different customer segments are expected to continue to drive the company's business growth.

The number of monthly active devices exceeded 600 million, and the card position advantage continued to strengthen

The company has a good customer base, as of the end of 24, the number of WPS Office monthly active devices worldwide was 632 million (yoy +6.22%), of which the number of monthly active devices of WPS Office PC version/mobile version was 291 million and 341 million respectively (yoy +9.81%, +3.33%). 1) 2C: The cumulative number of annual paying individual users in China was 41.7 million, a year-on-year increase of 17.49%; The cumulative number of overseas annual paying individual users was 1.74 million; WPS AI has 19.68 million monthly active users; 2) 2B: WPS has served more than 18,000 leading government and enterprise customers, and built an integrated teaching platform for more than 200 colleges and universities. We believe that with a good product position and user base, the company's AI commercialization results are expected to gradually appear.

Strengthen R&D to accelerate AI layout, optimistic about 25 years of commercialization In

2024, the company's sales/management/R&D expense ratios will be 19.36%/7.86%/33.11%, respectively, a year-on-year increase of -1.87pct/-1.89pct/+0.79pct. The increase in R&D rates is mainly due to the continuous increase in investment in AI product R&D, the company released a large government model in Wuhan Optics Valley in Hubei Province in 24 years, signed a strategic cooperation agreement with East Lake High-tech Zone, and officially settled in Wuhan R&D base in 2025. We believe that with strong R&D investment and a clear AI strategy, the AI upgrade and commercialization of the company's products are expected to accelerate simultaneously in 25 years.

Earnings Forecast and Valuation

We expect the company's revenue in 25-27 years to be 62.39, 77.05 and 9.678 billion yuan respectively (the previous value was 62.45 and 78.14 yuan in 25-26 years). The average expected PS of comparable companies in 25 years is 18.3 times, considering the company's card position advantage and product advantage, giving the company 30 times PS in 25 years, corresponding to a target price of 404.54 yuan (the previous value of 351.05 yuan, corresponding to 25E 26xPS, comparable average value of 16.1xPS), maintaining "buy".

Risk warning: The growth of paying users is less than expected, and the commercialization of AI is less than expected.