GF Securities has released a research report maintaining its "Buy" rating on China Literature (00772), assigning a valuation of 26 times the company's 2026 adjusted net profit and deriving a fair value of HK$25.59 per share.
The brokerage forecasts the company's revenue for 2026-2027 at RMB 7.45 billion and RMB 7.77 billion, representing year-on-year growth of 1% and 4%, respectively. Adjusted net profit attributable to shareholders is projected at RMB 850 million and RMB 1.35 billion, reflecting year-on-year changes of -1% and 58%.
The report notes that China Literature's deepening of its IP plus AI strategy could further enhance IP development efficiency, while its short drama and anime drama business is expected to benefit from OPC capacity expansion and diversified distribution channels, driving both revenue and profit growth.
The key points from GF Securities are as follows:
Deepening the IP plus AI strategy around an AI premium video matrix, an OPC one-stop platform, and full-chain IP operations
China Literature held its 2026 Creators Conference, with the core theme being the deepening of its IP plus AI strategy, centered on an AI premium video matrix, an OPC one-stop platform, and full-chain IP operations.
First, the company safeguards the value of original live-action novels, shifting resources toward high-quality novels through traffic distribution and paid subsidies. Anime dramas provide a new monetization source for novel visualization. According to data disclosed at the conference, through anime dramas, 1,500 writers have received visual adaptation income for the first time. As of September, more than 300 writers earned over RMB 10,000 in short anime drama revenue sharing, nearly 100 earned over RMB 100,000, and the highest revenue share exceeded RMB 1 million.
Second, the company upgraded its DramaBuddy anime drama assistant into an OPC one-stop platform, empowering creators throughout the entire process from IP library and AI tools to global multi-channel distribution and tiered incentive mechanisms. Currently, China Literature has signed 5,000 OPCs, with the top ten OPC creators each earning an average annual income exceeding RMB 1 million.
Additionally, the company positions AI premium animation and film-game interaction as innovative categories. China Literature announced its first batch of AI premium animation projects, including "Cyber Hero Chronicles," "Unscientific Beast Taming," "Judgment," and "Town Demon Museum." Over the next three years, the company will strengthen IP plus game and interactive film-game development, launching more than 20 games and interactive film-game titles adapted from China Literature IPs.
Green Bubble short drama and ToonScroll apps add distribution channels for China Literature's short anime dramas
Tencent's launch of Green Bubble short drama may enhance China Literature's content distribution in the domestic market. Currently, the domestic distribution channel relies heavily on Hongguo short drama, and a single distribution channel makes upstream content producers' distribution strategies relatively passive. More channels are expected to improve the stability of content distribution policies and the input-output ratio.
Overseas, China Literature has built its own premium anime drama platform ToonScroll. According to its interim report, the company plans to launch over 1,000 premium anime dramas within the year. The brokerage believes that China Literature's short anime dramas are expected to benefit from OPC capacity expansion and diversified distribution channels, driving both revenue and profit growth.
Deepening of the IP plus AI strategy may further improve IP development efficiency; attention to content product cycles
The brokerage believes that deepening the IP plus AI strategy may further enhance IP development efficiency, giving back to creators' earnings and forming a positive cycle from quality content to commercialization. Meanwhile, the brokerage suggests paying attention to the company's content product cycle. The games "Lord of Mysteries" and "Under One Person" may bring performance catalysts, while the launch of premium drama series such as "Princess Shang," "Joy of Life 3," "Son-in-Law 2," and "Sword Snow Stride 2" could drive a strong product year for New Classics Media.
Earnings forecast and investment recommendation
The brokerage forecasts China Literature's revenue for 2026-2027 at RMB 7.45 billion and RMB 7.77 billion, representing year-on-year growth of 1% and 4%, respectively. Adjusted net profit attributable to shareholders is projected at RMB 850 million and RMB 1.35 billion. The brokerage assigns a valuation of 26 times the company's 2026 adjusted net profit, derives a fair value of HK$25.59 per share, and maintains its "Buy" rating.
Risk warnings: tightening content regulation, the impact of new entertainment formats, and artist reputation risks.
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