Citibank: Maintains "buy" rating on CHINA LIT (00772) and raises target price to HK$37.4

Citibank released a research report stating that it is expected that CHINA LIT (00772) will announce its performance for the first half of 2025 in mid-August. The bank maintains its profit expectations for the full year of 2025 as it expects more content to be released in the second half of the year, and the growing IP derivative products and short film business will contribute to profits. Adjusting profit forecasts and considering industry valuation reassessment, the bank has raised its target price based on the Sum of the Parts (SOTP) valuation method to HKD 37.4 (previously HKD 31.5). The bank maintains a "buy" rating. CHINA LIT launched dozens of short films in the first half of 2025, with an overall hit rate of 60%. The short film "Diamond Husband Spoils Pregnant Wife" has become a phenomenon with a total viewing volume exceeding 3 billion times. The bank expects the positive results of the short films to help drive profit growth in the first half of 2025. For the profit of non-Xinli Media business, taking into account the contribution of the growing IP derivative products and short film business, as well as the stable online reading business, the bank expects the profit for the first half of 2025 to be RMB 503 million, higher than the RMB 401 million in the first half of 2024. Despite limited content releases in the first half of the year, the bank expects more series to be released in the second half of 2025. The series "Storm of Anti-Drug" went online on July 12th and as of July 18th, according to data from Artisan, it ranked second in market share. The content reserve for 2025 includes series such as "Mute House" and "Single Women."