Nomura: Maintains "buy" rating on KINGOFT (03888) and raises target price to HK$51.

Nomura released a research report stating that it maintains a "buy" rating for Kingsoft (03888), based on SOTP valuation, and has raised the group's target price from HK$35 to HK$51, an increase of 46%. It lowered Kingsoft's profit for 2024-2025 by 0.9-3.5% and raised the profit for 2026 by 3.2%. The bank also lowered the revenue for 2024-2025 by 0.4-1.6% to reflect a possible slowdown in software demand, but raised the revenue for 2026 by 1.6%. In the long term, AI monetization is expected to improve. The report suggests that it is expected that the growth momentum of Kingsoft's software business will bottom out in the second quarter of 2024, with the group showing signs of recovery in the second half of 2024. Additionally, with the launch of new games such as "Dust White Forbidden Domain" and "Sword and 3 Unlimited", the bank expects the demand for office software to gradually increase in 2025-2026 as downstream IT spending recovers and LLM innovation accelerates user adoption of WPSAI.