Total Revenue: Increased 15.8% to RMB8,000 billion. Online Business Revenue: Increased 4.1% to RMB4 billion. Self-Owned Platform Products Revenue: Increased 3.4% to RMB3.5 billion. Self-Operated Channels on Tencent Products Revenue: Decreased 28.2% to RMB245 million. Third-Party Platforms Revenue: Increased 32% to RMB254 million. Total Average MAUs: Decreased 19% to RMB166.6 million. Average MPUs: Grew 4.6% to RMB9.1 million. Monthly ARPU: RMB32, slightly decreased from RMB32.5 in 2023. IP Operations and Other Businesses Revenue: Increased 33.5% to RMB4.1 billion. Cost of Revenues: Increased 15.4% to RMB4.2 billion. Gross Profit: Increased 16.3% to RMB3.9 billion. Gross Margin: 48.3%, compared with 48.1% in 2023. Selling and Marketing Expenses: Increased 31.5% to RMB2.3 billion. G&A Expenses: Decreased 1.5% to RMB1.1 billion. Operating Loss: RMB336 million in 2024, compared to an operating profit of RMB709 million in 2023. Net Loss to Shareholders: RMB209 million in 2024, compared with RMB805 million net profit in 2023. Non-IFRS Operating Profit: RMB985 million, compared with RMB1 billion in 2023. Net Profit to Shareholders (Non-IFRS): RMB1.14 billion, compared with RMB1.13 billion in 2023.

Warning! GuruFocus has detected 3 Warning Signs with STU:C2X.

Release Date: March 18, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

China Literature Ltd (STU:C2X) reported a 15.8% increase in total revenue for 2024, reaching RMB8,000 billion. The company successfully launched a series of popular content, reinforcing its leading position in the industry. The integration of AI technology, such as the DeepSeek model, has significantly enhanced content creation and user engagement. The IP merchandise business experienced rapid growth, with total GMV surpassing RMB500 million in 2024. China Literature Ltd (STU:C2X) expanded its global reach, with AI-translated works accounting for 47% of all Chinese translated works on its platform.

Negative Points

The company's operating loss was RMB336 million in 2024, compared to an operating profit of RMB709 million in 2023. Net loss to shareholders was RMB209 million in 2024, a significant decline from a net profit of RMB805 million in 2023. Revenues from self-operated channels on Tencent products decreased by 28.2% due to a decline in advertising revenues. Average MAUs decreased by 19% to RMB166.6 million, indicating a drop in user engagement. The profit performance of New Classics Media was lower than market expectations, partly due to project delays and underperforming releases.

Story Continues

Q & A Highlights

Q: What are your plans for the IP commercialization strategy, and how do you plan to expand your sales system for IP derivatives? A: In 2024, we established a comprehensive omnichannel network for our IP merchandise, covering online live streaming channels, e-commerce stores, and more. We plan to expand by collaborating with partners across the industry and opening our network to boutique IP studios. Our merchandise team will enhance capabilities across the value chain, focusing on product planning, design, and distribution. We aim to increase GMV and profit through licensing partnerships and self-development.

Q: New Classics Media produced many high-quality TV dramas last year, but its profit performance was lower than expected. What are the future plans and pipeline for New Classics Media? A: In 2024, some projects were delayed, impacting profits. However, we have a rich pipeline for 2025 and beyond, including over 10 drama series and films. We expect to release six to seven drama series this year. The team is focused on premium content creation, aiming to solidify our leading position in the drama market.

Q: How is AI being used in content production, and what are the plans for monetizing AI tools? A: AI is integrated into various business scenarios, including literature content creation and user experience enhancement. Our writer assistant tool uses AI to help writers create more effectively. We are exploring AI applications in video, audio, and translation. Currently, there are no specific plans to charge for AI tools, as the focus is on improving user experience and financial performance.

Q: What are your investment plans in the short drama sector, and how do you plan to leverage IP to create popular short dramas? A: We focus on producing high-quality short dramas, leveraging our resources and partnerships. Our recent release achieved significant revenue, showcasing the potential of high-quality short dramas. We will continue to refine our production capacity and use cutting-edge technologies like AI to accelerate our short drama business. Both long and short dramas are important components of our content ecosystem, complementing each other.

Q: Can you provide an update on your AI investments and expectations for incremental revenue growth from AI? A: Our AI investments focus on R&D, product teams, and computing power. We have a team of AI professionals and collaborate with cloud computing providers. AI is expected to improve content creation efficiency, reduce costs, and accelerate overseas expansion. As AI technology progresses, we anticipate unlocking further profit growth opportunities.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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