Kingsoft Office Investment Quality Review (688111.SH)

Data timestamp: 2026-08-03 22:13 UTC
Quality score: 82/100
Valuation position: current price/base FV 3.12
Final signal: WATCHLIST

Core Conclusion

Kingsoft Office is a quality software name, but the price is far above fair value. CNY274.01 is 3.12x base FV of CNY87.89 and 5.02x conservative FV of CNY54.63. The report keeps it on the watchlist only because the business quality remains strong.

Business Breakdown

Five-year revenue CAGR is 15.9%, with latest-year revenue of CNY5.93bn. Office software subscriptions and AI optionality support the franchise, but current valuation demands very durable growth and monetization.

Business Quality

The 82/100 score reflects high FCF conversion, net cash, and software economics. Latest-year FCF was CNY2.40bn. Five-year average ROE was 14.6% and average ROIC was 14.1%. Quality is above threshold; price is the blocker.

Financial Audit

Fiscal 2025 revenue was CNY5.93bn, net profit CNY1.84bn, operating cash flow CNY2.50bn, capex CNY0.10bn, and FCF CNY2.40bn. Five-year FCF/net income was 1.36 and OCF/net income was 1.47. Latest net cash was CNY0.66bn.

Valuation

The conservative case uses CNY2.40bn normalized FCF, 2.0% growth, and 9.2x, producing CNY54.63 per share. The base case uses 4.0% growth and 15.6x, producing CNY87.89. The optimistic case uses 5.0% growth and 20.0x, producing CNY110.68. Current price exceeds all scenarios.

Buy And Tracking Discipline

The action is watch. A buy requires price/base FV below 0.70, quality above 75, continued FCF conversion, and credible evidence that AI and subscription growth can compound without margin dilution.

Risk Review

Risks include AI monetization disappointment, enterprise and public-sector spending cycles, competition, R&D intensity, margin pressure, and overvaluation. Weak FCF or net-cash erosion would reduce FV.

Data Sources

The memo relies on public market and financial data, company filings or investor-relations materials, ChinaBond yield data, and public FX data where applicable. This is research only, not personalized investment advice.