Kingsoft Office (688111) New Share Pricing Report: Domestic Office Leads Science and Technology Leading High-Quality Leader
Kingsoft Office is a leading domestic office software and service provider.The company’s products mainly include WPS Office office software and Kingsoft PowerWord. By the end of 2018, the company’s main products have more than 3 monthly active users (MAU).1 billion, of which WPS Office desktop version MAU exceeds 1.20 billion, ahead of other domestic office software; mobile version of MAU exceeds 1.8.1 billion, covering more than 220 countries and regions around the world. It ranks among the top in the global Google Play and Chinese application store office software application market, and continues to maintain a leading position.In addition, the company’s performance is very good, with a combined revenue and net profit of 44 in the past three years.3% and 54.6%. The business model has been continuously optimized and gradually changed from “productization” to “service-oriented”.The front-end company’s main product line extends from desktop products to multi-platform full-line products, business models from traditional office software product licenses to subscribe to office services, and Internet advertising promotion multi-modal development.For individual users, using the company’s products and office documents 无锡夜网 as a carrier, a comprehensive member service system has been launched, and user monetization has been gradually realized through a “free registered user + periodic bidding member” mechanism.For organization-level customers, based on the traditional sales authorization, gradually transition to the dual-mode operation mechanism of “office product authorization + office service subscription”. The trend of cloudification and mobility has made subscription business an important growth pole for the company.Market share, estimated rate, and customer unit price are the troika driving the growth of the company’s subscription business.1) Market share scale. The company ‘s WPS office software users account for less than 50% of the total domestic office market users. There is still room for improvement. The company strives to adopt a “free registered user + periodic membership” development strategy and mobileLeading edge to further increase market share.2) Estimated rate indicator, as of the end of 2018, the company has 2With 800 million registered users, the exchange rate for WPS members and rice hull members is only 2.1% and 1.3%, there are still free users with breakthroughs in scale, and the conversion of MS Office pirated users has gradually become a key breakthrough point.3) The customer unit price index will gradually increase the customer unit price through the improvement of product maturity.We believe that the growth of the subscription business will see an increase in market share and ratio in the short term and an increase in the unit price of long-term customers. According to our rough calculations, the long-term development space for the subscription business will reach 10 billion US dollars. The localization of office software is imperative, and the company welcomes great development potential.With the growing tension of international trade relations, certain security and reliability are more prominent, and basic office software is an important part of the national security and reliability strategy.The company has an absolute leading market share in the government and enterprise fields, and its products and services have been widely used in government, finance, energy, aviation and other important fields.The WPS Office Linux version already supports Loongson, Feiteng, Shenwei, Zhaoxin and other CPUs, and is compatible with all domestic operating system platforms such as Kirin, Puhua, Fangde, and Depth.During the period of the “Nuclear High Foundation”, several major demonstration projects completed system adaptation and application promotion.With the continuous construction of a safe and reliable system, the company is facing a new round of development opportunities. Investment suggestion: According to our core assumptions, the net profit attributable to the mother in 19-21 is predicted to be 3.8.4 billion, 6.95 billion, 10.3.4 billion.We use two estimation methods, PS and PE, to take the average valuation of comparable companies into consideration, and consider the company as a domestic office leader and a leading company in science and technology, give a certain valuation premium, and give the company 15 times PS in 2020, corresponding to a market value of 366.9 ppm; give the company 65 times PE in 2020, corresponding to a city size of 451.7.5 billion.In summary, we believe that the company’s reasonable value range is 366.900 million-451.7.5 billion, according to 4.6.1 billion total equity is calculated, corresponding to a coverage range of 79.6 yuan-100.2 yuan. Risk warning: the risk of profit model; rising labor costs; intensified market competition; single product and technology upgrade risks.