Citi: Surge in AI-Generated Short Drama Supply in Mainland China; Bullish on CHINA LIT (00772), KUAISHOU-W (01024), and MiniMax-W (00100)

Citi released a research report stating that AI is driving a content explosion, with China's short drama supply surging 13-fold in the first eight months of 2026, serving over 800 million users, with average daily viewing time per person exceeding 50 minutes, capturing time share from long-form video, online literature, and casual games. The bank believes the surge in content supply is more beneficial to platforms, IP, and AI video tools, and is bullish on IP leader CHINA LIT (00772), platforms and AI video tools KUAISHOU-W (01024) and MiniMax-W (00100). The bank noted that the short drama boom, dominated by ByteDance's Hongguo and intensified content competition, has led to deteriorating profit margins for producers. Even as production costs decline, producers still face fierce content competition. For long-form video platforms iQIYI, Inc. Sponsored ADR Class A (IQ.US) and Mango TV, the bank believes both play dual roles as producers and platforms; AI content launches may provide short-term positive catalysts, but it remains cautious on the long-term comprehensive impact. On the platform side, the bank said it has not yet seen a strong second-place challenger capable of challenging Hongguo. According to short drama industry experts, Hongguo holds a leading position with approximately 60% to 70% market share. The bank believes Kuaishou, as the second-largest short video drama platform backed by its user base, has the highest potential to further increase its short drama market share, possibly by strengthening cooperation with internet partners such as TENCENT (00700) and CHINA LIT. Tencent WeChat mini-programs are another important short drama distribution channel, and the bank is closely monitoring their progress.