Maintain Jinshan software buy rating, raise target share price to HK $24

Haitong International issued an investment report to maintain Jinshan software "buy" rating, the target share price raised to HK $24.

The following is a summary of the contents of the report:

The target price was raised to HK $24.00; We maintain a bullish view of Kingsoft Software as a comprehensive product and service provider in China including online gaming, office and Internet security software and cloud storage products. We expect revenue from Jinshan software Internet services to continue to expand at a high speed, while its online gaming business will be driven by a steady increase in pay-for-user growth. In addition, we anticipate that the fast-growing mobile Kis and WPS products of Jinshan software and the user base of cloud services will provide long-term commercialization opportunities. After adjusting our assumptions and earnings forecasts and extending our valuation base to the 2014 fiscal year forecast, we maintain the buying rating of the unit and raise the target price of the unit to HK $24.00, which is equivalent to 29 times times the expected profit multiplier for the 2014 fiscal year.

WPS software business will benefit. In view of China's increasing emphasis on the protection of intellectual property Rights, the State Council has issued a recent administration on the use of genuine software by domestic government agencies, including computer operating system software, Office software and anti-virus software. As China's leading office software provider, Kingsoft software will be a key beneficiary of the increased use of the Government's genuine software, which is due to its WPS office as a cheap alternative to Microsoft Office (and highly compatible), We believe that the product will be widely used in government departments in view of national security considerations and the State's intention to support the domestic software industry. In addition, Jinshan software earlier this year with ICBC signed a 3-year contract for the purchase of WPS products, and related revenue in 2013 3 quarters began to produce. Management to maintain earlier sales of Office software business 20% per cent growth guideline.

Robust expansion of the user base. The monthly active users of Kis mobile products grew to more than 102 million in July, only 41 million over 6 months ago. In particular, the company's Cheetah browser's monthly active users recorded 33 million in June, compared with less than 5 million 1 years ago. In addition, global monthly active users of the company's WPS Mobile office surged to 20 million in the 2 quarter of 2013, compared with 4 million 1 years ago. We see a strong growth in the user base and expect the company to continue to focus on the expansion of its user base before radical commercialization.

We maintain a bullish view of Kingsoft Software as a comprehensive product and service provider in China including online gaming, office and Internet security software and cloud storage products. We expect revenue from Jinshan software Internet services to continue to expand at a high speed, while its online gaming business will be driven by a steady increase in pay-for-user growth. In addition, we anticipate that the fast-growing mobile Kis and WPS products of Jinshan software and the user base of cloud services will provide long-term commercialization opportunities. After adjusting our assumptions and earnings forecasts and extending our valuation base to the 2014 fiscal year forecast, we maintain the buying rating of the unit and raise the target price of the unit to HK $24.00, which is equivalent to 29 times times the expected profit multiplier for the 2014 fiscal year.

In view of China's increasing emphasis on the protection of intellectual property Rights, the State Council has issued a recent administration on the use of genuine software by domestic government agencies, including computer operating system software, Office software and anti-virus software. As China's leading office software provider, Kingsoft software will be a key beneficiary of the increased use of the Government's genuine software, which is due to its WPS office as a cheap alternative to Microsoft Office (and highly compatible), And in the first half of 2012 the provincial government procurement accounted for nearly two-thirds of the share, we believe that in view of national security considerations and the country intended to support the domestic software industry, the product will be widely used in government departments. In addition, Jinshan software earlier this year with ICBC signed a 3-year contract for the purchase of WPS products, and related revenue in 2013 3 quarters began to produce. Management to maintain earlier sales of Office software business 20% per cent growth guideline.

The monthly active users of Kis mobile products grew to more than 102 million in July, only 41 million over 6 months ago. In particular, the company's Cheetah browser's monthly active users recorded 33 million in June, compared with less than 5 million 1 years ago. In addition, global monthly active users of the company's WPS Mobile office surged to 20 million in the 2 quarter of 2013, compared with 4 million 1 years ago. We see a strong growth in the user base and expect the company to continue to focus on the expansion of its user base before radical commercialization.