Dahua Jixian: Lower KINGSOFT (03888) target price to 44 Hong Kong dollars, third quarter performance below expectations.

Dahua Jixian released a research report stating that it maintains a "buy" rating for KINGSOFT (03888), with the target price slightly lowered to HK$44, while cautiously optimistic about the company's fourth-quarter online game revenue growth. The bank lowered KINGSOFT's fourth-quarter revenue forecast by 3%, but considering the sluggish online game revenue and uncertainty of new game monetization, it maintained its revenue forecast for next year unchanged. The bank also lowered its adjusted net profit forecast for the company for the fourth quarter of this year by 6% to reflect increased investment in AI. KINGSOFT's performance in the third quarter of 2025 missed expectations. Revenue fell by 17% year-on-year to RMB 2.4 billion, lower than market expectations by 6%. Gross profit margin narrowed by 4 percentage points year-on-year to 80.4%, in line with market consensus expectations. Due to weak revenue growth, operating profit plummeted by 76% to RMB 277 million, with an operating profit margin down by 28 percentage points year-on-year to 11%. Net profit fell by 49% year-on-year to RMB 213 million, with a net profit margin narrowed by 5 percentage points to 8.8%.