Broker: China Galaxy International Securities (Hong Kong) Co., Limited

Date of Report: March 18, 2026

Excerpt from China Galaxy International Securities report.

Report Summary

• China Literature Ltd. reported 2H25 revenue growth of 6.2% year-on-year to Rmb6.2bn, mainly driven by strong IP licensing and new business including AI comic dramas and short dramas.
• Adjusted net profit declined 20.2% due to losses from New Class Media (NCM), but this is expected to recover in 2026 with improvements in drama releases and business diversification.
• Management guides for 2026 revenue of Rmb7.9bn-8.0bn and net profit of Rmb1.4bn-1.5bn, with key growth drivers being IP derivatives, short dramas, and AI comic dramas.
• AI technology is rapidly reducing production costs and expanding content capacity; the market for AI comic drama is seen as potentially larger than short drama.
• China Literature’s monetisation capabilities remain solid, with stable online reading ARPU and gross margin, and expansion into new IP monetisation channels.
• Target price raised to HK\$45.5, maintaining an “Add” call based on higher profit forecasts and IP business growth potential.
• Key risks include higher expenses, weaker user metrics, and potential delays in drama releases.
• Tencent Holdings Ltd. remains the major shareholder (52.7%), with Carlyle Group L.P. holding 7.5%.
• The company is positioned for recovery and growth in 2026, supported by technology innovation and diversified business models.
• Consensus ratings are overwhelmingly positive with 19 Buy, 2 Hold, and 0 Sell recommendations.

Above is an excerpt from a report by China Galaxy International Securities. Clients of China Galaxy International Securities can be the first to access the full report from the China Galaxy International website: https://www.chinastock.com.hk