Fair-Value Report — Kingsoft Corporation (3888.HK)

Insider Signal

Signal Verification — PROCEED

This is a genuine open-market accumulation by a real economic buyer. Lei Jun is the co-founder and largest individual stakeholder of Kingsoft Corp, holding 22.45% post-purchase. He is not a broker, custodian, prime broker, nominee, index manager, or concert party reshuffle vehicle. The HKEX reason codes (1101/1103) confirm on-/off-exchange purchases at market prices. There is no concurrent placing, rights issue, share subscription, employee scheme, pledged-share transfer, or intra-group reshuffle that would contaminate this signal. The timing — two trading days after Q1 results — is consistent with a chairman buying after positive private-to-public information flow reversal. Signal quality: HIGH.

Verified Snapshot (prices as of 2 Jun 2026, intraday)

Sources: Yahoo Finance, Google Finance (2 Jun 2026). Company financials in CNY (RMB). Exchange rates used: 1 CNY ≈ 1.073 HKD; 1 USD ≈ 7.78 HKD. Subsidiary financials sourced separately.

Business Overview

Kingsoft Corporation (3888.HK) is a Hong Kong-listed investment holding company whose value is concentrated in two separately-listed subsidiaries and an unlisted gaming studio. The parent holds no meaningful direct operating revenue; consolidated group figures reflect majority-owned subsidiaries.

Segment 1 — Kingsoft Office Software (688111.SS / WPS Office)  ~47.6% held by 3888

The dominant Chinese office productivity suite — WPS Writer, Spreadsheets, Presentation, PDF. Over 669 million monthly-active devices. Q1 2026 revenue CNY 1.61B (+24% YoY); Q1 2026 net income CNY 2.20B (includes substantial fair-value investment gains — normalized margins are high-30s%). Listed on Shanghai STAR Market (688111.SS) at CNY 110.5B market cap (P/E 33×) as of 2 Jun 2026. Subscription and enterprise licensing fuel recurring revenue. This is the primary source of value in Kingsoft Corp but is held at arm's length through a China-listed entity.

Segment 2 — Kingsoft Cloud Holdings (KC / NASDAQ; 3896.HK)  ~53.5% held by 3888

AI-focused cloud infrastructure and compute services. Q4 2025 revenue CNY 2.76B (+24% YoY); adjusted EBITDA CNY 712M (+114% YoY); net loss –CNY 160M. AI cloud billings growing >90% YoY and represent >50% of public cloud revenue. Listed on NASDAQ and HKEX at a combined market cap USD 4.03B (≈HKD 31.4B) as of 1 Jun 2026. Still net-loss despite EBITDA progress; cash burning has slowed substantially. This is the most visible growth driver but also the biggest near-term drag on consolidated earnings quality.

Segment 3 — Seasun (Games)

Private online gaming subsidiary. Operates the Jianxia (Swordsman Online) franchise and related titles. Smaller contributor; estimated recurring EBITDA CNY 300–500M. Not publicly listed.

Consolidated Group Financials (for context)

Kingsoft Corp Q1 2026: revenue CNY 2.42B (+3.4% YoY), net income CNY 1.09B (+284% YoY), net margin 45.2%. The massive net income / margin is attributable to fair-value gains on listed investments, not to operating performance. FY2025 normalized: revenue CNY ~10.97B, net income attributable to shareholders CNY 2,004M (EPS CNY 1.46). Balance sheet (Q1 2026): total assets CNY 41.52B, cash + STI CNY 26.46B, total liabilities CNY 7.03B, total equity CNY 34.50B (includes significant NCI from Kingsoft Cloud and Kingsoft Office consolidation).

Valuation

Methodology: SOTP / NAV Discount (Primary)

Kingsoft Corp is an investment holding company with listed subsidiaries that trade at visible market prices. The appropriate primary methodology is Sum-of-the-Parts (SOTP) — each listed subsidiary valued at its current market cap multiplied by Kingsoft Corp's ownership stake, with standard holding-company discounts applied to reflect: (a) capital repatriation complexity for China A-share assets held through HK; (b) inability of Kingsoft Corp to freely sell its controlling blocks in the open market without regulatory approvals; (c) prevailing HK holdco discount norms (typically 20–50% for China tech holdcos). Net cash is taken at face value (no discount). Private assets at estimated multiples.

30% discount on Kingsoft Office stake: reflects A-share capital barriers, controlling-block illiquidity premium, and HK holdco norms for China STAR Market assets. 5% discount on Kingsoft Cloud: dual-listed (NASDAQ + HKEX), lower liquidity friction. Parent-level cash is estimated by subtracting Kingsoft Cloud's estimated consolidated cash (KC's EBITDA of CNY ~2.8B/year suggests CNY 10–14B cash at KC level) and Kingsoft Office subsidiary cash (CNY ~2–3B). These estimates carry material uncertainty; the exact parent-only cash can only be read from the parent-entity (not consolidated) balance sheet in the annual report.

Three-Scenario SOTP Table

Check: Normalized P/E

TTM P/E of 9.82× is depressed because Q1 2026 net income (CNY 1.09B, 284% YoY) includes large non-recurring fair-value investment gains — not a sustainable run-rate. The appropriate P/E base is FY2025: EPS CNY 1.46/share ≈ HKD 1.57. At the current price, normalized P/E = 14.8×. For a mixed holdco with a 33× WPS pure-play inside it, 14.8× is reasonable but not demonstrably cheap on earnings alone. A fair normalized P/E of 17× (slight discount to Chinese software peers) implies HKD 26.7 — consistent with the base SOTP case.

Reverse Read

At HKD 23.24 and market cap HKD 32.1B: subtract the Kingsoft Cloud stake (HKD 15.9B after 5% discount) and estimated parent cash (HKD 6.9B). The residual — what the market assigns to the WPS stake, Seasun, and Cheetah — is only HKD 9.2B. Yet the WPS stake at even a 65% holding-company discount is worth HKD 19.8B. The market is pricing the WPS franchise at a level implying either near-complete write-off of the stake, or that Kingsoft Corp can never monetise it. History of HK holdcos suggests such extreme discounts can persist for years — but when catalysed (private equity, privatisation, restructuring), they can narrow sharply.

Median-Anchored Peer Table

Conclusion

Kingsoft Corporation (3888.HK) is a structurally underappreciated holding company whose public market value implies approximately zero credit for its controlling stake in Kingsoft Office (WPS) — a CNY 110.5B market-cap, 33×-P/E, high-growth franchise. Even under the most punishing holding-company discount assumptions, the WPS stake alone should contribute meaningful value above what the market ascribes to the residual.

The immediate signal is high-quality: Lei Jun, co-founder and non-executive chairman, deployed HKD 149.7M of personal capital on the two trading days following the Q1 2026 results announcement — a credible informed-insider accumulation at near 52-week lows. He now holds 22.45% of the company. There is no indication this was a subscription, placing, intra-group reshuffle, or pledge artifact.

However, several uncertainties prevent a higher conviction rating: (1) SOTP stakes are approximate and require annual report verification; (2) Kingsoft Cloud's persistent net losses are a real drag; (3) Q1 2026 reported earnings are inflated by investment gains and will normalize; (4) holding-company discounts in HK can be structural and persist for years without catalyst.

Rating: Speculative Buy. Base fair value: HKD 28.50 (12-month). Probability-weighted across bear/base/bull: HKD 28.75 (+24% vs current HKD 23.24). Downside to bear: HKD 18.00 (–22%). Position sizing should reflect the SOTP stake uncertainty.

Key Risks

• Permanent holdco discount: HK-listed China tech holding companies have traded at 40–60% discounts to NAV for years without catalysts narrowing them. This may be structural, not cyclical.
• Kingsoft Cloud losses: KC remains net-loss despite EBITDA improvements. Continued cash burn erodes consolidated equity; Kingsoft Corp's balance sheet partially absorbs it. AI cloud capex cycle (CNY ~3B in 2026) may extend the loss period.
• Q1 2026 earnings quality: Reported group net income CNY 1.09B (45% margin, +284% YoY) includes large fair-value investment gains. Normalized run-rate is materially lower. Investors buying on TTM P/E of 9.82× may be misled.
• AI disruption to WPS: Microsoft 365 Copilot, Google Workspace AI, and domestic AI-native tools (Kimi Docs, Doubao, ByteDance) are directly competing for enterprise productivity spend. WPS must invest heavily to remain relevant.
• SOTP stake uncertainty: This report uses ~47.6% (WPS) and ~53.5% (KC) ownership percentages from FY2024 data. If these have changed materially (e.g., a secondary offering at KC or WPS, or partial stake sale), the SOTP can shift significantly.
• China regulatory and macro risk: VIE structure concerns, data sovereignty regulations, and GDP-growth risk remain overarching factors for all China tech holdings.
• Capital repatriation: Dividends from Kingsoft Office (688111.SS) to the HK-listed parent require PRC foreign exchange approvals. This friction is structural and partially explains the holdco discount.

Sources

• Yahoo Finance — 3888.HK quote, P/E (TTM), EPS, 52-week range, shares outstanding, dividend data (retrieved 2 Jun 2026)
• Google Finance — 3888.HK consolidated Q1 2026 financials, balance sheet; 688111.SS (Kingsoft Office) price, market cap, Q1 2026 revenue & net income, P/E; KC (NASDAQ) price, market cap, Q4 2025 revenue & net income (retrieved 2 Jun 2026)
• HKEX Disclosure-of-Interests (DION) system — Lei Jun DI filing data, reason codes 1101/1103, event dates 28–29 May 2026, consideration HKD 149.73M, post-transaction holding 22.45% (as represented in the automated screen candidate data)
• Kingsoft Corp FY2025 consolidated results (revenue CNY 10.97B; net income attributable CNY 2,004M; EPS CNY 1.46) — sourced via institutional financial database; direct HKEX PDF retrieval failed during preparation of this report; readers should verify against the filed announcement
• Kingsoft Cloud Holdings (KC) Q4 2025 earnings — revenue CNY 2.76B, adjusted EBITDA CNY 712M, net loss –CNY 160M — sourced via Google Finance / public earnings release (2 Jun 2026)
• Ownership stake estimates (~47.6% WPS, ~53.5% KC) — based on publicly available institutional research as of FY2024; must be verified from Kingsoft Corp FY2025 annual report