Key Takeaways
CLSA trimmed its target price for Kingsoft Corp. (03888.HK) to HKD29.1 from HKD35.5, citing significant headwinds in the company’s gaming business while maintaining an Outperform rating on the stock.
The revision follows a fourth-quarter performance that saw Kingsoft’s gaming revenue decline 33 percent year-over-year, a steeper drop than the broker's 1.5 percent forecast. CLSA attributed the weakness to a high comparison base in the prior year that pressured the company’s flagship games.
In contrast, the office software business posted strong results, with revenue increasing 17 percent year-over-year. This growth was primarily driven by the strong performance of WPS365 and an accelerated expansion of its direct-to-consumer business.
CLSA called the current fiscal year a “transitional year” for the gaming division as it undergoes leadership and strategic adjustments. The broker lowered its revenue forecasts for Kingsoft for this year and next by seven percent each, reducing operating profit forecasts by 21 percent and 16 percent, respectively. The new target price reflects these lowered estimates and an increased holding company discount.
The forecast cut suggests near-term pressure on the stock from its gaming segment, though the continued strength in office software provides a substantial buffer. Investors will be watching for signs of stabilization in the gaming business in the coming quarters.
This article is for informational purposes only and does not constitute investment advice.
