CICC maintained its "Outperform Industry" rating for KINGSOFT (03888) but lowered its target price by 13% to HK$39, citing short-term uncertainties in the gaming segment. The adjustment reflects a more conservative valuation approach, with the group discount rate raised from 40% to 50% due to widening A/H valuation gaps in the office software business. The gaming division's price-to-earnings (P/E) multiple was reduced from 10x to 8x, and net profit margin assumptions were cut from 20% to 15%, implying a 44x 2026 P/E.

KINGSOFT's Q3 2025 results fell below market expectations, primarily due to weaker gaming performance. Revenue declined 17% year-on-year to RMB2.419 billion, while operating profit plunged 75.8% to RMB277 million. CICC revised its 2025 and 2026 revenue forecasts downward by 6.9% and 5.6% to RMB9.62 billion and RMB10.91 billion, respectively, reflecting cautious gaming sector assumptions.

Despite the revenue downgrade, CICC raised its 2025 net profit forecast by 27.1% to RMB1.79 billion, factoring in one-time gains from Kingsoft Cloud Holdings Ltd's (KC) share placement. However, 2026 net profit projections were slashed 34.7% to RMB1.12 billion due to lower revenue expectations and increased AI-related investments.