BOCOM INTL: China Literature (00772) Maintains "Neutral" Rating with Slightly Lower Target Price of HK$28

BOCOM INTL issued a research report saying it maintains a "Neutral" rating for CHINA LIT (00772) with a slightly lowered target price from 29 Hong Kong dollars to 28 Hong Kong dollars. Based on the deferral of the New Li project and factors such as AI personnel/computing power input, the non-IFRS net profit forecast is lowered by 18% to 1.1 billion yuan, with a corresponding profit margin of 15%, a year-on-year decrease of 1 percentage point. Based on the 2025 programming project and potential AI input, the adjusted net profit forecast for 2025 is lowered by 13% to 1.4 billion yuan. BOCOM INTL points out that CHINA LIT has issued a profit warning, expecting a change from profit to loss by 2024, with an IFRS net loss of 150 to 250 million yuan, compared to a net profit of 800 million yuan in 2023. This is mainly due to the non-cash goodwill impairment generated by the acquisition of New Li Media in 2018. It is expected that the company's non-IFRS net profit will be between 1.1 billion and 1.15 billion yuan, which is basically flat compared to 2023, but 16% to 19% lower than market expectations. The bank slightly lowered the full-year revenue forecast for CHINA LIT in 2024 by 1% to 7.7 billion yuan, mainly considering the deferral of some New Li projects (the drama project scheduled for the second half of 2024 only includes the year-end release of "Da Feng Da Geng Ren").