Lyon: Lower KINGSOFT (03888) target price to HK$35.5, expects continuous pressure on gaming business.

Lyon released a research report stating that KINGSOFT (03888) third quarter revenue fell short of expectations, dragged down by the gaming business. Game revenue decreased by 47% year-on-year, 8% lower than the bank's expectations, due to pressure from main game titles facing a high base in the previous year. Office software revenue growth accelerated, rising by 26% year-on-year, driven by progress in government information technology applications and WPS365. The growth of personal paid users remained stable, with average revenue per user (ARPU) trending towards stability. The bank believes that the gaming business will continue to face pressure in the coming quarters, but the office software business may maintain a strong momentum. The bank has lowered revenue forecasts for 2025 and 2026 by 3% and 4% respectively, net profit forecasts by 15% and 18%, and the target price from HK$37.8 to HK$35.5, maintaining an outperform the market rating.