HK Stock Market Move | CHINA LIT (00772) falls over 6% in the afternoon, the company sets aside a new Lisheng goodwill impairment of over 1 billion yuan, and institutions downgrade its profit forecast.

China Literature (00772) fell more than 6% in the afternoon, with a 6.23% decline at the time of publication, trading at HKD 26.35 with a turnover of HKD 324 million. On the news front, China Literature issued a profit warning announcement, and Yuewen plans to make a provision for impairment of goodwill of RMB 1.05 billion to RMB 1.15 billion for Xin Li Media. As a result, it is expected that Yuewen will incur a net loss of approximately RMB 150 million to RMB 250 million in 2024; in terms of adjusted net profit, it is expected to be approximately RMB 1.1 billion to RMB 1.15 billion, maintaining stability compared to the same period in 2023. Lyon published a report stating that it has lowered its adjusted net profit forecast for Yuewen from 2024 to 2026 by 18% to 19%, reflecting a decrease in future profits of Xin Li Media and an increase in sales and marketing expenses. The target price calculated by the bank based on discounted cash flow method was lowered from the original HKD 32 to HKD 28.5. Considering the 8% downside potential, the bank has downgraded its investment rating on Yuewen from "outperform" to "hold" due to increased market uncertainty about profitability.