China Literature (0772) AI Stock Analysis

• Market Cap: HK$33.24B
• Dividend Yield: N/A
• Average Volume (3M): 4.19M
• Price to Earnings (P/E): 231.2
• Beta (1Y): 1.42
• 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): 0.92
• 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: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: HK$35.01
• Price Target Upside: 7.26% Upside
• 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 ▲(10.29% Upside)

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, an investment holding company, operates an online literature platform in the People's Republic of China. The company promotes intellectual properties primarily through its online literature platforms, such as QQ Reading and Qidian; and New Classics Media, a film and TV drama series production house. It is also involved in the self-operated channels business on partner distribution platforms. In addition, the company licenses the content to third-party partners for distribution, as well as offers online paid reading and content adaptations into various entertainment formats. Further, it provides reading, copyright commercialization, and writer cultivation and brokerage services; and operates text work reading and related open platform through technology methods and digital media, including personal computers, Internet, and mobile network. Additionally, the company engages in the production and distribution of television series, web series, and films; licensing and distribution of film and television properties; licensing copyrights; sale of physical books; and operation of in-house online games, etc. The company was founded in 2002 and is headquartered in Shanghai, the People's Republic of China. China Literature Limited is a subsidiary of Tencent Holdings Limited.

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: 32.64
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

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 32.64 is below the 20-day moving average (MA) of 35.46, below the 50-day MA of 37.56, and below the 200-day MA of 32.81, indicating a bearish trend. The MACD of -1.45 indicates Positive momentum. The RSI at 35.94 is Neutral, neither overbought nor oversold. The STOCH value of 18.02 is Positive, 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$33.24B	34.08	19.44%	2.88%	15.57%	94.36%
Sector *	60 Neutral	$48.67B	4.58	-11.27%	4.14%	2.83%	-41.78%
2518	60 Neutral	€22.46B	13.64	6.05%	10.02%	-5.74%	-14.46%
9898	60 Neutral	HK$19.00B	5.77	12.49%	8.27%	-1.40%	22.37%
2390	53 Neutral	HK$2.12B	20.48	2.39%	―	-23.80%	―
0772	52 Neutral	HK$33.24B	231.16	0.67%	―	-10.26%	-85.75%
1896	49 Neutral	HK$7.82B	95.33	0.82%	4.75%	-7.61%	-90.51%

China Literature Corporate Events

China Literature Renews Agreement with Tencent and Enters New Deals with YHKT

China Literature Limited has announced the renewal of its existing cooperation agreement with Tencent Computer, extending their collaboration on novel creation and competition organization through the 2026 Novel Creation and Solicitation Cooperation Framework Agreement. Additionally, the company has entered into new agreements with YHKT for IP and merchandise cooperation and joint investment in media products. These transactions are considered continuing connected transactions under the Hong Kong Stock Exchange Listing Rules, requiring reporting and annual review but exempt from independent shareholders’ approval.

China Literature Announces Share Buy-back Plan to Boost Market Confidence

China Literature Limited has announced a voluntary on-market share buy-back plan, approved by its board of directors. The plan allows for the repurchase of up to 10% of the company’s issued shares, with a maximum fund allocation of HKD1.2 billion, using existing cash reserves. The board believes the shares are undervalued and aims to reflect confidence in the company’s prospects while maintaining financial resources for growth.

China Literature Updates Nomination Committee Guidelines

China Literature Limited has updated the terms of reference for its Nomination Committee, which is responsible for identifying and recommending director candidates, overseeing board performance evaluations, and developing nomination guidelines. The committee’s composition requires a majority of independent non-executive directors and includes provisions for gender diversity, reflecting the company’s commitment to governance and diversity.