China Literature Reports Mixed Financial Performance for H1 2025

China Literature Limited, a prominent entity in the online literature and intellectual property (IP) incubation sector in China, has unveiled its unaudited consolidated results for the first half of 2025. The company, listed under stock code 0772, reported significant fluctuations in its financial metrics compared to the first half of 2024. Let's delve into the highlights of this report and its implications for the future of the company.

Financial Overview

The total revenue for the six months ending June 30, 2025, stood at RMB 3,190.6 million (approximately USD 445.7 million), reflecting a decrease from RMB 4,190.9 million reported in the same period last year. Notably, revenue from online business surged by 2.3% year-on-year, reaching RMB 1,985.4 million (USD 277.3 million). This increase resulted primarily from the robust performance of self-owned platform products, demonstrating a steadfast focus on enhancing core operations and delivering high-quality content.

Conversely, the intellectual property operations saw a dramatic drop of 46.4% year-on-year, with revenues plummeting to RMB 1,205.2 million (USD 168.4 million). This significant downturn was largely attributed to the absence of new TV shows or film releases from New Classics Media during the reporting period.

Profitability Metrics

On a year-over-year basis, profit attributable to equity holders of the company exhibited an impressive increase of 68.5%, amounting to RMB 849.8 million (USD 118.7 million). Basic earnings per share rose to RMB 0.84, underscoring a positive shift in profitability, despite the setbacks in IP operation revenues.

However, when analyzed on a non-IFRS basis to exclude one-time and non-cash items, profit decreased to RMB 507.8 million (USD 70.9 million), influenced mainly by the scheduling challenges affecting new content releases. Strikingly, if adjusted for these factors, the non-IFRS profit revealed a growth of 35.7% year-on-year, highlighting the underlying strength of core operations.

Insights from CEO

Mr. Hou Xiaonan, the CEO, expressed optimism about the company's online content ecosystem, stating that the revenues from the online segment are flourishing. The company is witnessing substantial growth in its various segments, particularly through the rise of short dramas and IP merchandising. Remarkably, the IP merchandise sector achieved a gross merchandise value (GMV) of RMB 480 million, nearly matching last year's total, emphasizing the increasing synergy between IP and consumer products.

Business Segment Analysis

1. Online Business Performance: The online literacy platform showed resilience with improvement in self-owned product revenues (+3.1% year-over-year). However, revenues from channels on Tencent products declined by 25.6%, indicating challenges in ad revenues tied to evolving distribution practices. Nevertheless, revenues from third-party platform partnerships surged by 23.1%, signaling the growing recognition of high-quality content outside the company's direct channels.

2. Intellectual Property Operations: This sector revealed a stark decline, primarily due to the lack of new film and TV adaptations. The traditional model of generating compelling narratives from literary sources remained valid. Still, the absence of new releases within the period exemplifies the cyclical nature of the entertainment industry, hindering immediate revenue inflows.

3. Growing Market for Short Dramas and Merchandising: The emergence of short dramas is profoundly reshaping audience engagement and consumption patterns, opening avenues for monetization from a previously untapped medium. This trend, alongside the upswing in merchandising, showcases the potential for IP to resonate with consumers beyond conventional media.

Future Outlook

China Literature remains optimistic about the future, citing a transformative year with the potential for strong growth momentum. The collective resurgence of its vast IP library, experience, and cross-industry collaborations is poised to drive the sector's evolution further. Mr. Hou emphasized that 2025 could turn out to be pivotal for monetizing IPs, strengthening their foothold in the digital story-telling landscape.

The company is dedicated to enhancing its competitive advantage by capitalizing on its expanding content universe, which continues to draw engagement and interest from a wide user base. Looking ahead, China Literature is focused on solidifying its position and morphing into a substantial force within China's growing IP ecosystem.

In conclusion, while the initial figures present a mixed outlook for China Literature for the first half of 2025, there remains an underlying potential driven by innovations in content delivery and market engagement strategies that could undoubtedly pave the way for a transformative impact on the industry as a whole.