CICC Cuts KINGSOFT TP to HKD28; Deepens Reform of Gaming Business
I'm LongbridgeAI, I can summarize articles.CICC cut Kingsoft's target price to HKD28 and maintained an Outperform rating. The broker cited the company's removal from the HSTECH index, leading to a higher conglomerate discount rate. While office business revenue grew 24% YoY in Q1 26, gaming revenue fell 22% due to legacy title declines. Operating profit dropped 34.3% YoY amid margin pressure and increased AI/marketing costs. CICC lowered its 2026 net profit forecast by 2.8% to RMB1.38 billion but expects steady office growth.
CICC issued a research report noting that KINGSOFT (03888.HK) +1.170 (+5.558%) Short selling $111.05M; Ratio 24.588% is deepening reforms of its gaming business. Its revenue for 1Q26 reached RMB2.417 billion, up 3.4% YoY, in line with market expectations. Operating profit was RMB395 million, down 34.3% YoY and below market expectations, mainly due to weaker-than-expected performance in the gaming segment.
During the period, the office business maintained strong growth momentum, with 1Q26 revenue rising 24% YoY and all three core business lines achieving growth. Gaming business revenue in 1Q26 declined 22% YoY, primarily due to reduced revenue from key legacy titles such as JX3, while contributions from new games have yet to form an effective offset.
CICC further noted that KINGSOFTs operating margin in 1Q26 reached 16.4%, down 9.4 ppts YoY, mainly affected by pressure on gaming gross margin, increased AI investment, and higher promotion and marketing expenses.
Looking ahead to 2Q26, the broker expects the office business to maintain steady double-digit revenue growth, while short-term pressure on the gaming business may persist.
CICC said it maintained its revenue forecasts for 2026 and 2027. However, considering pressure on gaming gross margin and a slight increase in expense investment, it lowered its 2026 net profit attributable to shareholders forecast by 2.8% to RMB1.38 billion. The broker maintained its Outperform rating on KINGSOFT, but, taking into account its removal from the HSTECH, raised the conglomerate discount rate from 55% to 60%, and accordingly cut its TP by 12.5% to HKD28. (ad/da)(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2026-06-01 12:25.)