CICC: Maintains "Outperform" rating on CHINA LIT (00772), target price HK$29, bullish on the "IP+AI" strategic layout.

CICC released a research report maintaining its "Outperform" rating on CHINA LIT (00772) and a target price of HK$29, corresponding to Non-IFRS P/E ratios of 30x and 19x for 2026 and 2027 respectively, implying 31.5% upside from the current share price. The bank maintains its Non-IFRS net profit attributable to shareholders forecasts for 2026 and 2027 at RMB850 million and RMB1.311 billion respectively. Recently, investor attention to AI film and television has increased. On October 16, the company held the 2026 China Literature Creation Conference in Hangzhou. CEO Hou Xiaonan stated that China Literature plans to deepen its "IP+AI" strategic layout, centered on an AI premium video matrix, the OPC one-stop platform, and full-chain IP operations. CICC's main views are as follows: Building an AI premium video matrix, launching the OPC one-stop platform At the 2026 China Literature Creation Conference, the company announced plans to build an AI premium video matrix covering all formats including comic dramas, animation, "live-action+AI" short dramas, and medium-to-long dramas, and officially released its first batch of AI premium animation projects, including "Cyber Hero Legend," "Unscientific Beast Taming," "The Verdict," and "Town Demon Museum." In the first half of 2026, China Literature's short drama and comic drama business revenue exceeded RMB430 million, up 230% year on year. At the conference, the company upgraded the DramaBuddy comic drama assistant to the OPC (one-person company) one-stop platform, providing a complete chain from IP source to AI production and all-network distribution. Pudong New Area, together with the company, is jointly building an AI content industry base. Relying on China Literature's IP and AIGC foundation, paired with a high-standard motion capture exhibition hall and an AIGC production black-box studio, and through a model of pre-drawing materials as a foundation plus AI batch generation, the bank believes this is expected to significantly compress labor, time, and production costs. The bank believes that China Literature has abundant IP resource reserves and is expected to combine AI and industrial chain layout advantages to achieve capacity expansion for IP visualization projects. Deepening full-chain IP operations, with rich reserves of key dramas for 2027 At the 2026 China Literature Creation Conference, the company launched the "IP Committee" model and officially announced its first new project under this model, "Defending Nanshan Park" (a collaboration between China Literature and Three-Body Universe), enabling full-chain operations spanning animation, live-action film and television, and offline derivatives. Over the next three years, the company plans to launch more than 20 games adapted from China Literature IP, with key products including "Under One Person" (December 2026), the IP electronic trading card game "Stars Comic Cards" (full-platform reservations already opened), and the interactive film-game "Mysterious Revival." According to the latest Tencent Video 2027 slate, the company has rich reserves of key dramas, including "Sword Comes," "A Thousand Miles of Rivers and Mountains," "The General's Only Daughter," and "Joy of Life 3." Risk warnings Uncertainty in content projects; core business under pressure beyond expectations; copyright operations progressing slower than expected.