China Literature (0772) AI Stock Analysis

• Market Cap: $43.27B
• Dividend Yield: N/A
• Average Volume (3M): 4.19M
• Price to Earnings (P/E): 300.0
• Beta (1Y): 1.35
• Revenue Growth: -10.26%
• EPS Growth: -85.75%
• Country: HK
• Employees: 1,740
• Sector: Communication Services
• Sector Strength: 97
• Industry: Internet Content & Information
• EPS (TTM): 0.91
• Shares Outstanding: 1,021,472,840
• 10 Day Avg. Volume: 4,011,075
• 30 Day Avg. Volume: 4,186,547
• PEG Ratio: 0.89
• Price to Book (P/B): 1.28
• Price to Sales (P/S): 2.90
• P/FCF Ratio: 9.79
• Enterprise Value/Market Cap: 0.53
• Enterprise Value/Revenue: 3.22
• Enterprise Value/Gross Profit: 6.65
• Enterprise Value/Ebitda: 39.60
• 1Y Price Target: $35.03
• Price Target Upside: -3.92% Downside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 2
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 52 Neutral
• Price Target: HK$36.00 ▼(-1.26% Downside)

The overall stock score is primarily influenced by strong cash flow and a solid balance sheet, which are offset by profitability challenges and a high P/E ratio indicating overvaluation. Technical indicators suggest a bearish trend, contributing to a lower score. The absence of earnings call data and corporate events means these factors did not influence the score.

Positive Factors

Strong Cash Flow

The significant increase in free cash flow highlights strong cash generation, providing the company with operational flexibility and the ability to invest in growth opportunities.

Solid Balance Sheet

A strong equity position and low leverage enhance financial stability, allowing the company to withstand economic fluctuations and invest in strategic initiatives.

Revenue Diversification

Diverse revenue streams reduce dependency on any single source, enhancing resilience against market changes and supporting long-term growth prospects.

Negative Factors

Profitability Challenges

The shift to a net loss indicates profitability challenges that could hinder reinvestment in the business and affect shareholder returns if not addressed.

Negative Return on Equity

Negative return on equity suggests inefficiencies in generating profits from shareholders' equity, which could impact investor confidence and future capital raising.

Declining Revenue Growth

While revenue growth was strong, the decline in net income and EBIT indicates underlying issues that could affect long-term growth sustainability if not addressed.

China Literature Business Overview & Revenue Model

Company Description

China Literature Limited is a leading online literature platform in China, primarily engaged in the publishing and distribution of digital content. The company operates a vast library of literary works, including novels, comics, and other forms of written content, catering to a diverse audience across various genres. As a subsidiary of Tencent, China Literature benefits from strong technological support and integration with social media, gaming, and other digital entertainment sectors.

How the Company Makes Money

China Literature generates revenue through multiple streams, primarily by charging readers for premium content access on its platform. The company offers a subscription model, allowing users to pay for memberships that grant them access to exclusive and high-quality literary works. Additionally, it earns money from in-app purchases and microtransactions related to virtual goods within its ecosystem. The company also partners with other media companies and publishers for content licensing, which further diversifies its revenue streams. Advertising revenue from its platform and collaborations with Tencent's ecosystem, including potential cross-promotional opportunities, significantly contribute to its earnings.

China Literature Financial Statement Overview

Summary

China Literature experienced strong revenue growth but faced profitability challenges with a net loss in 2024. The balance sheet is solid with low leverage and a strong equity position. Cash flow performance is strong, supporting the company's liquidity and operational flexibility despite the income loss. The company should focus on improving profitability to leverage its strong cash flow and balance sheet.

Income Statement

The company showed a significant decline in net income, turning from a profit of HKD 804.9 million in 2023 to a loss of HKD 209.2 million in 2024. Gross profit margin decreased slightly from 48.1% in 2023 to 48.3% in 2024. Revenue growth was strong at 15.8% from 2023 to 2024, but the negative net income and EBIT in 2024 are concerning.

Balance Sheet

The company maintains a strong equity position with an equity ratio of 80.1% in 2024. The debt-to-equity ratio is low at 0.009, indicating low leverage. However, return on equity turned negative in 2024, reflecting the net loss.

Cash Flow

Free cash flow increased significantly by 152.4% from 2023 to 2024, showing strong cash generation capability. The operating cash flow to net income ratio improved substantially, indicating better cash earnings quality. The company shows a robust cash flow position despite the net income loss.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	7.12B	8.12B	7.01B	7.63B	8.67B	8.53B
Gross Profit	3.45B	3.92B	3.37B	4.03B	4.60B	4.23B
EBITDA	579.28M	748.35M	1.22B	1.20B	1.12B	1.06B
Net Income	136.24M	-209.22M	804.88M	608.19M	1.85B	-4.50B
Balance Sheet
Total Assets	23.20B	22.95B	23.19B	22.73B	23.30B	21.32B
Cash, Cash Equivalents and Short-Term Investments	7.05B	7.62B	6.28B	7.51B	7.21B	6.26B
Total Debt	206.47M	166.21M	238.10M	617.98M	1.45B	1.33B
Total Liabilities	4.04B	4.57B	4.16B	4.78B	6.11B	6.22B
Stockholders Equity	19.16B	18.37B	19.02B	17.96B	17.19B	15.09B
Cash Flow
Free Cash Flow	667.33M	2.41B	954.13M	1.25B	879.35M	821.95M
Operating Cash Flow	840.47M	2.53B	1.13B	1.58B	1.12B	1.11B
Investing Cash Flow	-1.26B	-1.76B	-3.39B	528.10M	936.23M	-4.19B
Financing Cash Flow	-471.75M	-346.01M	-510.82M	-1.15B	-349.99M	-92.34M

China Literature Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 36.46
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HK:0772, the sentiment is Negative. The current price of 36.46 is below the 20-day moving average (MA) of 37.37, below the 50-day MA of 38.52, and above the 200-day MA of 32.69, indicating a neutral trend. The MACD of -0.72 indicates Positive momentum. The RSI at 44.12 is Neutral, neither overbought nor oversold. The STOCH value of 31.91 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for HK:0772.

China Literature Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
1357	66 Neutral	HK$34.29B	35.16	19.44%	2.79%	15.57%	94.36%
Sector *	60 Neutral	$48.67B	4.58	-11.27%	4.14%	2.83%	-41.78%
2518	60 Neutral	€24.00B	14.69	6.05%	10.06%	-5.74%	-14.46%
9898	60 Neutral	HK$20.59B	7.67	12.49%	7.92%	-1.40%	22.37%
2390	53 Neutral	HK$2.80B	18.44	2.39%	―	-23.80%	―
0772	52 Neutral	$43.27B	300.00	0.67%	―	-10.26%	-85.75%
1896	49 Neutral	HK$8.16B	99.43	0.82%	4.51%	-7.61%	-90.51%

China Literature Corporate Events

China Literature Grants Over 4.5 Million RSUs to Key Personnel

China Literature Limited has announced the grant of 4,531,609 restricted share units (RSUs) under its 2020 RSU Scheme to certain directors and employees, including executive director Huang Yan and non-executive director Cao Huayi. The RSUs, which do not have performance targets, are part of the company’s strategy to align the interests of its key personnel with those of the company and its shareholders, reinforcing their commitment to the group’s long-term growth. The vesting of these RSUs will occur in tranches over four years, with a clawback provision in place for cases of misconduct or financial misstatement.

The most recent analyst rating on (HK:0772) stock is a Hold with a HK$45.00 price target. To see the full list of analyst forecasts on China Literature stock, see the HK:0772 Stock Forecast page.

China Literature Limited Reports Strong Profit Growth

China Literature Limited, a leading player in China’s intellectual property (IP) industry, specializes in online literature and the commercialization of literary content through various media formats. The company operates in the digital entertainment sector, leveraging its extensive IP library to produce TV series, films, animations, and merchandise.

China Literature Renews Key Agreements with Tencent

China Literature Limited has announced the renewal of its existing cooperation agreements with Tencent Computer, extending their collaboration until 2026. These agreements cover promotion, payment services, and cloud and technical services, which are crucial for the company’s operations and market positioning. The transactions are classified as continuing connected transactions under Hong Kong’s Listing Rules, subject to certain reporting and review requirements but exempt from independent shareholder approval.

The most recent analyst rating on (HK:0772) stock is a Buy with a HK$32.00 price target. To see the full list of analyst forecasts on China Literature stock, see the HK:0772 Stock Forecast page.

China Literature Limited Sees Profit Surge Amidst IP Industry Transformation

China Literature Limited reported a significant financial performance for the first half of 2025, with a notable increase in operating profit and profit before income tax, despite a decline in revenues and gross profit. The company is well-positioned to leverage the rapid growth and transformation in China’s IP industry, driven by the increasing value of premium IP, the rise of short dramas, and the popularity of IP merchandise. The company’s online reading platform continues to thrive, with substantial growth in the number of writers and literary works, contributing to a modest increase in revenue from its online business.

The most recent analyst rating on (HK:0772) stock is a Buy with a HK$32.00 price target. To see the full list of analyst forecasts on China Literature stock, see the HK:0772 Stock Forecast page.