交银国际研究 公司更新 互联网 收盘价 目标价 潜在涨幅 2024年3月19日 港元27.35 港元29.00 +6.0% 阅文集团 (772 HK) 在线业务企稳，版权运营逐步放量，现价已反映 2024 年强劲管线预期  2023年业绩符合预期。2023年全年收入70亿元，与我们/市场预期一致， 个股评级 同比降8%，主要因在线业务渠道收缩，及新丽上线项目减少。经调整运 中性 营利润10.5亿元，同比降23% ，基本符合我们预期，对应利润率为15%， 较2022年降3个百分点，主要因版权业务利润率下降以及AI投入。经调 整净利润降16%至11亿元，基本符合市场预期。 1年股价表现 772 HK 恒生指数  业绩概览：1）在线业务2023年收入降10%，主要因分销渠道优化以及内 30% 容分发聚焦核心付费产品影响广告收入。自有渠道付费用户仍维持健康增 20% 10% 长趋势（下半年，自有MPU同比增11%），受益于持续的内容生态建设 0% 和有效的反盗版措施，付费率同/环比提升0.8/0.2个百分点至4.3%。月人 -10% -20% 均付费同比-13%至32元，受低价产品影响。核心阅读产品起点读书202 ...

传媒/数字媒体 公 司 研 阅文集团（00772.HK） 大 IP 产品储备丰富，2024 年或迎供给释放 究 2024年03月19日 ——港股公司信息更新报告 投资评级：买入（维持） 方光照（分析师） 田鹏（分析师） fangguangzhao@kysec.cn tianpeng@kysec.cn 证 书编号：S0790520030004 证书编号：S0790523090001 日期 2024/3/18 港 当前股价(港元) 27.350  2023年业绩回暖，看好优质内容释放驱动公司业绩增长，维持“买入”评级 股 一年最高最低(港元) 45.750/20.400 2023年公司实现总收入70.23亿元（同比-8.0%），其中在线业务收入39.48亿元 公 （同比-9.5%），主要系公司优化投资回报率较低的分发渠道所致。IP运营及其他 司 总市值(亿港元) 279.90 信 流通市值(亿港元) 279.90 业务收入30.64亿元（同比-6.1%），主要系公司2023年上线的影视内容少于2022 息 总股本(亿股) 10.23 年所致。公司毛利率为 48.1%（同比-4.8pct），净利率为 11.5%（ ...

业绩简评 2024 年 3月 18 日，公司发布2023年全年业绩公告，2023公司实 现营收70.12 亿元，同比-8%，NON-GAAP 净利润11.3 亿元，同比 -16.2%。 经营分析 AI 在 IP 生态中全方位赋能，IP 商业化及海外平台均有望受益。 1）作家层面：AI 辅助创作在作家中渗透率提升。2023年，公司上 线基于阅文妙笔大模型的“作家助手妙笔版”已向所有签约作家开 放，其中的 AI 功能的周使用率已达 30%。2）IP 商业化层面：AI 应用将提升 IP 价值释放效率，缩短 IP 从视觉到商业化的路径， 港币(元) 成交金额(百万元) 公司计划将 AI 技术赋能小说动漫化改编，更多作品或因 AI 应用 50.00 600 获得改编机会。3）海外平台：公司海外阅读平台WebNovel 受益于 45.00 500 AI 翻译带来的效率提升。2023 年 12 月，WebNovel 畅销榜排名前 40.00 400 35.00 300 100 的作品中有21部为 AI翻译，后续将有助于推动公司文学作品 30.00 200 的规模化出海。4）TO C 应用：2023 年 8月开始测试“筑梦岛 ...

Financial Performance - Total revenue for the year ended December 31, 2023, was RMB 7,011,785, a decrease of 8.0% compared to RMB 7,625,622 in 2022[3] - Gross profit for the same period was RMB 3,371,463, reflecting a decline of 16.3% from RMB 4,030,103 in the previous year[3] - Operating profit increased by 12.8% to RMB 709,309, up from RMB 628,834 in 2022[3] - Revenue decreased by 8.0% year-on-year to RMB 7,011.8 million for the year ended December 31, 2023[12] - Online business revenue decreased by 9.5% year-on-year to RMB 3,948.1 million, accounting for 56.3% of total revenue[13] - The average revenue per paying user decreased by 14.0% year-on-year to RMB 32.5[17] - Copyright operation revenue decreased by 5.9% year-on-year to RMB 2,973.8 million, primarily due to fewer TV dramas launched[16] - Non-IFRS net profit for the year was RMB 1,129.0 million, compared to RMB 1,347.7 million in the previous year[11] - The company reported a net profit of RMB 804,879 thousand for 2023, compared to a profit of RMB 608,186 thousand in 2022, indicating an increase of approximately 32.3%[51] - Basic earnings per share for the year were RMB 0.80, up from RMB 0.60 in 2022, representing a growth of 33.33%[46] User Engagement - The number of new authors on the online reading platform grew by approximately 380,000, with over 670,000 new novels added, totaling more than 39 billion new words[4] - The average monthly active users for self-owned platform products and Tencent's self-operated channels decreased by 15.7% year-on-year to 205.6 million[15] - The average monthly paying users increased by 10.1% year-on-year to 8.7 million, with self-owned platform products seeing over 20% growth[17] Cost and Expenses - Total revenue cost increased to RMB 3,640.3 million, representing 51.9% of total revenue, up from 47.2% in the previous year[18] - Sales and marketing expenses decreased by 14.1% to RMB 1,719.5 million, accounting for 24.5% of revenue, down from 26.3%[19] - General and administrative expenses decreased by 6.2% to RMB 1,161.0 million, representing 16.6% of revenue, slightly up from 16.2%[20] - Financial costs decreased significantly from RMB 53.9 million to RMB 12.9 million[11] Assets and Liabilities - The company's total assets increased from RMB 22,734.5 million as of December 31, 2022, to RMB 23,188.5 million as of December 31, 2023, indicating a growth of approximately 2.0%[32] - The total liabilities decreased from RMB 4,779.8 million in 2022 to RMB 4,164.0 million in 2023, resulting in a reduction of the debt-to-asset ratio from 21.0% to 18.0%[32] - The company maintained a cash net position of RMB 8,101.4 million as of December 31, 2023, an increase from RMB 7,091.4 million in 2022[34] Strategic Initiatives - The company plans to enter the premium short drama market with a "Short Drama Galaxy Incubation Plan," which includes a creation fund of RMB 100 million[10] - The company successfully removed 1.1 million piracy links, enhancing the subscription numbers for quality content[5] - The AI translation model was upgraded, resulting in 21 out of the top 100 best-selling works on WebNovel being AI-translated[10] Tax and Compliance - The total income tax expense for the year ended December 31, 2023, was RMB 97,850,000, a decrease of 41.3% from RMB 166,192,000 in 2022[89] - The effective corporate income tax rate for certain subsidiaries in China was reduced to 15% due to high-tech enterprise status, compared to the standard rate of 25%[88] Shareholder Information - The group did not declare or pay any dividends for the year ended December 31, 2023, consistent with the previous year[97] - The annual general meeting is scheduled for June 3, 2024, with a notice to be issued in due course[149] Miscellaneous - The company operates primarily in China, providing reading services, copyright commercialization, and content creation, with a focus on digital media[57] - The company adopted several new accounting standards starting January 1, 2023, including IFRS 17 on insurance contracts, which did not have a significant impact on the consolidated financial statements[62]

Investment Rating - The investment rating for the company is Neutral, with a target price adjusted to HKD 29.00, indicating a potential upside of 13.9% from the current price of HKD 25.45 [1][14]. Core Views - The report highlights a downward revision of the 2023 revenue and profit expectations for the company, projecting a total revenue of RMB 7 billion, a year-on-year decline of 8%, primarily due to adjustments in online business channels and delays in key IP projects. The adjusted net profit is expected to be RMB 1.1 billion, a 20% decrease year-on-year, with a profit margin of 15%, down by 3 percentage points [1][2]. - Despite the challenges, the company maintains a rich reserve of IP projects for 2024, with anticipated strong performance from key adaptations and a robust pipeline of popular IP adaptations [2][3]. Financial Summary - The company’s projected financials for 2023 include: - Revenue: RMB 7,004 million, down 8.2% year-on-year - Adjusted net profit: RMB 1,083 million, down 20.1% year-on-year - Earnings per share (EPS): RMB 1.06, with a projected decline of 28% [3][12]. - For 2024, the company expects a revenue increase to RMB 7,579 million, with a net profit forecast of RMB 1.387 billion, reflecting a recovery in profitability [3][12]. Business Operations - The online business segment is projected to generate RMB 3.98 billion in 2023, a decline of 9% year-on-year, while the IP operation revenue is expected to decrease by 8% due to project delays [2][3]. - The company is exploring short drama formats, which may provide additional revenue opportunities, as evidenced by the success of the fantasy short drama "万道龙皇" [2][3]. Valuation - The report suggests a valuation based on a 20x price-to-earnings ratio for 2024, leading to a target price adjustment from HKD 36 to HKD 29. The current price corresponds to a 1.2x PEG ratio for 2024, compared to the industry average of 1.0x [2][3].

智通财经APP获悉，阅文集团(00772)早盘再涨近6%，截至发稿，涨5.49%，报25港元，成交额3910.08万港元。 消息面上，2024年春节档全国电影票房为80.16亿元，刷新档期票房纪录。贾玲执导并主演的《热辣滚烫》凭借27.18亿票房成为春节档冠军。该片由阅文集团旗下新丽电影、阅文影视共同出品。 此外，2月16日，OpenAI推出其首款文生视频大模型Sora。华福证券指出，IP版权公司积累的IP形态以文字、卡通人物形象等为主，文生视频模型可帮助此类公司迅速产出中短视频，公司业务范围将得到极大扩展，运营效率将发生巨大跃升。考虑到Sora模型的可得性，文生视频的应用会最先在海外落地。 ...

智通财经APP获悉，天风证券发布研究报告称，维持阅文集团(00772)“买入”评级，预测2023E-2025ENon-IFRS净利润分别为10.6/12.6/15.3亿元(前值13.8/16.2/19.4亿元)。该行认为集团作为数字阅读龙头，以在线阅读业务为基石，全面发力IP全产业链条运营。公司2023年业绩短期承压，2024年有望充分受益于内容端供给加速，长期有望依托IP生态链成长为全球顶尖的文化产业集团。 天风证券主要观点如下： FY23前瞻：AI布局及剧目上线推迟或致收入承压 该行预计FY23阅文集团收入为69亿元，yoy-9%;Non-IFRS归母净利润为10.6亿元，yoy-21%，主要系《与凤行》推迟及AI投入的影响。《与凤行》由赵丽颖、林更新主演，系古装小说IP改编而成，将在央视、江苏卫视、腾讯视频首播，目前腾讯视频平台预约人数超470万。2023年7月，阅文发布行业首个大模型“阅文妙笔”以及基于此的应用端产品“作家助手妙笔版”，主要服务于作家创作辅助、运营数据等方面，AI投入或带动作家创作效率提升。 FY24：关注重点剧目、电影情况 该行认为阅文集团2024年或有多部重点剧目值得关注： 1)电 ...

Share Issuance Plans - As of December 31, 2022, the total number of shares available for issuance under the 2020 Restricted Share Unit Plan was 43,669,204 shares, accounting for 4.30% of the issued shares[1] - As of the annual report date, the total number of shares available for issuance under the 2021 Share Option Scheme was 25,470,141 shares, representing 2.51% of the issued shares[1] Restricted Share Units and Options - The total number of restricted share units available for grant under the 2020 Restricted Share Unit Plan at the beginning and end of the reporting period was 40,504,211 and 37,008,888, respectively[1] - The total number of options available for grant under the 2021 Share Option Scheme at the beginning and end of the reporting period was 17,658,688 and 16,227,128, respectively[1]

Financial Performance - Revenue for the six months ended June 30, 2023, was RMB 3,283,026 thousand, a decrease of 19.7% compared to RMB 4,087,214 thousand in the same period of 2022[5]. - Gross profit for the same period was RMB 1,604,762 thousand, down 25.2% from RMB 2,146,326 thousand year-on-year[5]. - Operating profit increased by 23.8% to RMB 310,948 thousand, compared to RMB 251,209 thousand in the previous year[5]. - Profit before tax rose by 25.0% to RMB 425,589 thousand, up from RMB 340,436 thousand in the prior year[5]. - Net profit for the period was RMB 375,979 thousand, representing a significant increase of 61.9% from RMB 232,276 thousand year-on-year[5]. - Profit attributable to equity holders of the company was RMB 376,680 thousand, a 64.8% increase compared to RMB 228,545 thousand in the same period of 2022[5]. - Non-IFRS profit attributable to equity holders was RMB 603,119 thousand, down 9.4% from RMB 665,995 thousand year-on-year[5]. - Basic earnings per share decreased to RMB 0.37 from RMB 0.60 year-on-year, representing a decline of 38.3%[43]. - The company reported a net profit attributable to equity holders of RMB 376,680,000 for the first half of 2023, an increase of 65.0% from RMB 228,545,000 in the same period of 2022[167]. Market Strategy and Growth - The company is focusing on expanding its market presence and enhancing user engagement through new product offerings and technology advancements[5]. - Future outlook includes strategic initiatives aimed at improving financial performance and market share[5]. - The management is committed to exploring potential mergers and acquisitions to drive growth and innovation[5]. - The company reported significant growth in user numbers and revenue for its reading products, particularly for Qidian Reading, due to collaborative efforts with the government and the publishing industry to combat online literature piracy[7]. - The CEO highlighted that the paid reading model is the most effective incubator for intellectual property (IP), emphasizing the long-term commitment to enhancing the author ecosystem and driving platform growth[8]. - In 2023, the company identified key opportunities in AI technology, which is expected to empower content production and enhance user engagement across various content forms[9]. - The company launched several successful IP content over the past three years, including popular titles such as "Celebrating the Remaining Years," "The Novelist," and "The World of Humanity," contributing to its growth strategy[9]. - The establishment of four major business units aims to strengthen the integration of content and platforms, enhance the success rate of film and television projects, and leverage AI technologies for innovative applications[11]. - The company is focusing on a quality-first strategy, moving away from traditional growth methods, and prioritizing the creation of premium IP[9]. - AI technology will play a crucial role in the company's strategy, particularly in enhancing the efficiency of IP development and translation for global reach[9]. - The company aims to build a multi-modal content platform, integrating various forms of IP to create a comprehensive ecosystem[9]. - The company is optimistic about the future collaboration between human authors and AI, believing it will enhance the storytelling experience[7]. - The company is committed to maintaining strong protections for authors and copyright holders in light of emerging generative AI technologies[7]. User Engagement and Product Development - The number of new authors on the online reading platform increased by approximately 200,000, and the number of new novels added was 350,000, with a total word count exceeding 19.5 billion[13]. - The average subscription count for new works increased by over 120% year-on-year, with the number of works having over 10,000 subscriptions per month rising by over 50%[13]. - The company launched the first large language model in the online literature industry, "Yuewen Miaobi," aimed at enhancing user engagement and content creation[13]. - The overseas reading platform WebNovel offers approximately 3,200 translated Chinese works and around 560,000 local original works as of June 30, 2023[17]. - The company plans to leverage AI technology to enhance user products and streamline business processes, aiming for a transformative impact on the industry[12]. - The company is focused on expanding its IP ecosystem and enhancing the quality of its content offerings across various media, including film, television, and gaming[15]. Financial Position and Cash Flow - Total assets as of June 30, 2023, were RMB 22,374,085 thousand, a slight decrease from RMB 22,734,478 thousand at the end of 2022[113]. - Total liabilities decreased to RMB 3,810,512 thousand from RMB 4,779,756 thousand, reflecting a reduction of 20.3%[114]. - Cash and cash equivalents were RMB 3,359,906 thousand, down from RMB 5,545,766 thousand, indicating a decrease of 39.4%[113]. - The company reported a total comprehensive income of RMB 447,241 thousand for the period, compared to RMB 343,137 thousand in the previous year, an increase of 30.4%[111]. - The company’s equity attributable to owners increased to RMB 18,563,573 thousand from RMB 17,954,722 thousand, reflecting a growth of 3.4%[113]. - For the six months ended June 30, 2023, the operating cash flow generated was RMB 719,577,000, a decrease from RMB 969,592,000 in the same period of 2022, representing a decline of approximately 26%[120]. - The net cash generated from operating activities was RMB 615,638,000, compared to RMB 706,767,000 in the previous year, indicating a decrease of about 13%[120]. - The company incurred a net cash outflow from investing activities of RMB 2,382,543,000, contrasting with a net cash inflow of RMB 106,106,000 in the same period last year[120]. - The financing activities resulted in a net cash outflow of RMB 466,370,000, compared to RMB 674,036,000 in the previous year, showing a reduction in cash outflow by about 31%[121]. Shareholder and Governance Information - The company did not recommend the distribution of an interim dividend for the six months ended June 30, 2023, compared to zero for the same period in 2022[56]. - As of June 30, 2023, the total number of shares issued was 1,018,259,788[59]. - The company’s executive director and president, Mr. Hou Xiaonan, was appointed as the Chief Executive Officer effective May 10, 2023[56]. - The audit committee reviewed the interim results for the six months ended June 30, 2023, and found the risk management and internal control systems to be effective and adequate[56]. - The company’s board of directors has adopted the corporate governance code and complied with all applicable provisions during the reporting period[56]. - Tencent Holdings Limited holds a controlling interest with 577,643,604 shares, representing approximately 56.73% of the company's equity[64]. - The company has adopted a Restricted Share Unit Plan aimed at incentivizing outstanding performance among employees and directors, effective for a period of 10 years since December 23, 2014[66]. Risk Management and Compliance - The company faces various financial risks, including market risk, credit risk, and liquidity risk, which are managed through established policies[136]. - The company has not made any significant changes to its risk management policies as of June 30, 2023[136]. - The company is continuously evaluating the impact of new tax regulations on its financial statements, particularly regarding deferred tax accounting[134]. - The company plans to disclose new tax risks starting December 31, 2023, in line with the recent tax reforms[134].

[Financial Performance Summary](index=1&type=section&id=Financial%20Performance%20Summary) [Financial Performance Summary](index=1&type=section&id=Financial%20Performance%20Summary) In the first half of 2023, the company's revenue decreased by 19.7% year-on-year to RMB 3.28 billion, and gross profit fell by 25.2%, while operating profit and profit attributable to equity holders increased significantly by 23.8% and 64.8% respectively, with non-IFRS profit attributable to equity holders seeing a slight decrease of 9.4% H1 2023 Financial Highlights (Unaudited) | Financial Metric | H1 2023 (RMB '000) | H1 2022 (RMB '000) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 3,283,026 | 4,087,214 | (19.7) | | Gross Profit | 1,604,762 | 2,146,326 | (25.2) | | Operating Profit | 310,948 | 251,209 | 23.8 | | Profit Before Income Tax | 425,589 | 340,436 | 25.0 | | Profit for the Period | 375,979 | 232,276 | 61.9 | | Profit Attributable to Equity Holders | 376,680 | 228,545 | 64.8 | | Non-IFRS Profit Attributable to Equity Holders | 603,119 | 665,995 | (9.4) | [Business Review and Outlook](index=2&type=section&id=Business%20Review%20and%20Outlook) [Overview](index=2&type=section&id=Overview) The company has proposed an "IP upgrade strategy" focusing on the full lifecycle development of IPs, emphasizing quality and efficiency, viewing AI, particularly AIGC, as a core engine for future growth, aiming to build a multi-modal content platform and an integrated IP ecosystem, supported by a restructured organization and the launch of "Yuewen Miaobi" - The company has established a new vision and mission: "Let good stories live on" (讓好故事生生不息), shifting its strategic focus to creating high-quality, enduring IPs[3](index=3&type=chunk) - AIGC is identified as the new engine to drive quality and efficiency in the IP ecosystem, enabling a multi-modal content platform and an integrated upstream-downstream IP system[4](index=4&type=chunk) - The company restructured into four business units to better integrate content, platforms, and film/television production, and to advance AI technology development and application[4](index=4&type=chunk) - In July, the company launched "Yuewen Miaobi," the online literature industry's first large language model, and its application "Writer's Assistant Miaobi Version," marking its first step in embracing AIGC to empower the creative ecosystem[5](index=5&type=chunk) [H1 2023 Business Highlights](index=4&type=section&id=H1%202023%20Business%20Highlights) In H1 2023, the company strengthened its content ecosystem, with significant growth in high-quality works and an 8.6% YoY increase in Monthly Paying Users (MPU) to 8.8 million, while advancing IP visualization with popular TV series and IP commercialization through derivative products and game adaptations, and expanding its overseas platform WebNovel with approximately 3,200 translated Chinese works and 560,000 local original works [IP Creation](index=4&type=section&id=IP%20Creation) The online reading platform saw the addition of approximately 200,000 new writers and 350,000 new novels, with the number of new works with an average subscription per chapter exceeding 10,000 growing by over 120% YoY, contributing to an 8.6% YoY increase in Monthly Paying Users (MPU) to 8.8 million - In H1 2023, the platform added **~200,000 writers** and **~350,000 novels**, with over **19.5 billion new words**[6](index=6&type=chunk) - The number of new works with an average subscription per chapter of over **10,000** increased by more than **120% YoY**[6](index=6&type=chunk) - Monthly Paying Users (MPU) grew by **8.6% YoY** and **12.8% sequentially** to **8.8 million**[6](index=6&type=chunk) [IP Visualization](index=4&type=section&id=IP%20Visualization) The company successfully launched several high-quality visual adaptations, including the TV series "The Ordinary Road" (平凡之路) and "Turn on the Right Way of Life" (縱有疾風起) which achieved top viewership ratings, and maintained high popularity for animation sequels like "Stellar Transformations" (星辰變), while comics such as "The Guardian of the Great Feng" (大奉打更人) were well-received - The TV series "The Ordinary Road" (平凡之路) ranked first on Tencent Video's drama chart for **16 consecutive days** and topped multiple third-party data platforms[7](index=7&type=chunk) - The second season of the annualized animation "Battle Through the Heavens" (斗破蒼穹) was launched, consistently ranking in the top three on Tencent Video's animation channel[8](index=8&type=chunk) [IP Commercialization and Monetization](index=5&type=section&id=IP%20Commercialization%20and%20Monetization) The company advanced its IP commercialization through derivatives and gaming, launching proprietary blind boxes for popular IPs like "Lord of the Mysteries" (詭秘之主) and "Battle Through the Heavens" (斗破蒼穹), and successfully launching licensed games based on "A Record of a Mortal's Journey to Immortality" (凡人修仙傳) and "Swallowed Star" (吞噬星空), while updating the self-operated game "New Douluo Dalu" (新斗羅大陸) - Launched proprietary blind boxes for key IPs such as "Lord of the Mysteries" and "Battle Through the Heavens"[9](index=9&type=chunk) - Licensed games "A Record of a Mortal's Journey to Immortality" and "Swallowed Star" were successfully launched in H1 2023[9](index=9&type=chunk) [Overseas Business](index=5&type=section&id=Overseas%20Business) As of June 30, 2023, the company's overseas reading platform, WebNovel, offered approximately 3,200 translated Chinese works and around 560,000 local original works to international users, demonstrating continued expansion in the global market - WebNovel provided overseas users with approximately **3,200 translated Chinese works** and **560,000 local original works**[10](index=10&type=chunk) [Management Discussion and Analysis](index=6&type=section&id=Management%20Discussion%20and%20Analysis) [Financial Performance Comparison (H1 2023 vs H1 2022)](index=6&type=section&id=Financial%20Performance%20Comparison) Revenue for H1 2023 decreased by 19.7% YoY to RMB 3.28 billion, primarily due to a 30.1% decline in copyright operation revenue from fewer film/TV projects and an 11.6% fall in online business revenue due to reduced marketing spend and channel optimization, resulting in a gross margin drop from 52.5% to 48.9%, yet operating profit grew 23.8% to RMB 310.9 million, driven by a 26.0% reduction in sales and marketing expenses and a significant positive swing in 'Other gains/(losses), net' [Revenue](index=7&type=section&id=Revenue) Total revenue decreased 19.7% YoY to RMB 3.28 billion, with online business revenue falling 11.6% to RMB 2.04 billion due to strategic reductions in marketing spend and channel optimization, and copyright operation and other revenue dropping 30.1% to RMB 1.24 billion primarily because fewer film and TV projects were launched, while Average Monthly Active Users (MAU) decreased by 20.0% to 211.7 million, Average Monthly Paying Users (MPU) increased by 8.6% to 8.8 million, and Average Monthly Revenue Per Paying User (ARPPU) declined by 14.2% to RMB 33.3 Revenue Breakdown by Segment (RMB '000) | Segment | H1 2023 | % of Total | H1 2022 | % of Total | | :--- | :--- | :--- | :--- | :--- | | **Online Business** | **2,038,736** | **62.1%** | **2,307,016** | **56.4%** | | - Own Platform Products | 1,763,999 | 53.7% | 1,763,077 | 43.1% | | - Tencent Products Channel | 177,008 | 5.4% | 347,482 | 8.5% | | - Third-party Platforms | 97,729 | 3.0% | 196,457 | 4.8% | | **Copyright Operation & Other** | **1,244,290** | **37.9%** | **1,780,198** | **43.6%** | | - Copyright Operation | 1,190,119 | 36.3% | 1,731,258 | 42.4% | | - Other | 54,171 | 1.6% | 48,940 | 1.2% | | **Total Revenue** | **3,283,026** | **100.0%** | **4,087,214** | **100.0%** | Key Operating Data | Metric | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Average MAU (million) | 211.7 | 264.7 | | Average MPU (million) | 8.8 | 8.1 | | ARPPU (RMB) | 33.3 | 38.8 | - The decrease in online business revenue from Tencent and third-party channels was mainly due to optimizing distribution channels and discontinuing cooperation with certain partners[13](index=13&type=chunk) - The decrease in copyright operation revenue was mainly due to fewer TV series, web series, and films launched in H1 2023 compared to H1 2022[15](index=15&type=chunk) [Cost of Revenue, Gross Profit, and Gross Margin](index=10&type=section&id=Cost%20of%20Revenue%2C%20Gross%20Profit%2C%20and%20Gross%20Margin) Cost of revenue decreased by 13.5% YoY to RMB 1.68 billion, primarily due to lower production costs for film and TV series in line with reduced revenue, and decreased platform distribution costs, yet gross profit fell by 25.2% to RMB 1.60 billion, and the gross margin contracted to 48.9% from 52.5% in the prior year period Cost of Revenue Breakdown (RMB '000) | Cost Component | H1 2023 | % of Revenue | H1 2022 | % of Revenue | | :--- | :--- | :--- | :--- | :--- | | Content costs | 751,939 | 22.9% | 743,142 | 18.2% | | Platform distribution costs | 383,224 | 11.7% | 475,040 | 11.6% | | Production costs of TV/web series, animations and films | 268,714 | 8.2% | 451,389 | 11.0% | | Amortization of intangible assets | 74,989 | 2.3% | 102,106 | 2.5% | | **Total Cost of Revenue** | **1,678,264** | **51.1%** | **1,940,888** | **47.5%** | - Gross profit decreased by **25.2% YoY** to **RMB 1,604.8 million**. Gross margin was **48.9%** in H1 2023, compared to **52.5%** in H1 2022[17](index=17&type=chunk) [Operating Expenses and Profitability](index=11&type=section&id=Operating%20Expenses%20and%20Profitability) Operating profit increased by 23.8% YoY to RMB 310.9 million, mainly driven by a 26.0% reduction in sales and marketing expenses to RMB 822.1 million due to cost-saving initiatives and fewer film/TV projects, a 4.1% decrease in general and administrative expenses, and a significant positive swing in other net gains, resulting in profit attributable to equity holders growing by 64.8% to RMB 376.7 million - Sales and marketing expenses decreased by **26.0% YoY** to **RMB 822.1 million**, primarily due to reduced promotion and advertising expenses for the online business and fewer film/TV projects[19](index=19&type=chunk) - General and administrative expenses decreased by **4.1% YoY** to **RMB 534.5 million**, mainly due to lower employee benefit expenses[19](index=19&type=chunk) - The company recorded other net gains of **RMB 5.8 million**, compared to other net losses of **RMB 235.4 million** in H1 2022, mainly due to the absence of fair value losses on certain investments recorded in the prior year[18](index=18&type=chunk) - As a result of the above factors, operating profit increased by **23.8% YoY** to **RMB 310.9 million**[19](index=19&type=chunk) [Segment Information](index=12&type=section&id=Segment%20Information) The Online Business segment's revenue decreased by 11.6% to RMB 2.04 billion, with its gross margin remaining stable at 50.0%, while the Copyright Operation and Other segment's revenue saw a larger decline of 30.1% to RMB 1.24 billion, and its gross margin fell significantly from 55.4% in H1 2022 to 47.0% in H1 2023, reflecting the impact of fewer high-margin film and TV projects Segment Performance (H1 2023 vs H1 2022) | Segment | H1 2023 Revenue (RMB '000) | H1 2023 Gross Profit (RMB '000) | H1 2023 Gross Margin (%) | H1 2022 Revenue (RMB '000) | H1 2022 Gross Profit (RMB '000) | H1 2022 Gross Margin (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Online Business | 2,038,736 | 1,020,014 | 50.0% | 2,307,016 | 1,160,271 | 50.3% | | Copyright Operation & Other | 1,244,290 | 584,748 | 47.0% | 1,780,198 | 986,055 | 55.4% | | **Total** | **3,283,026** | **1,604,762** | **48.9%** | **4,087,214** | **2,146,326** | **52.5%** | [Other Financial Information & Non-IFRS Measures](index=13&type=section&id=Other%20Financial%20Information%20%26%20Non-IFRS%20Measures) Adjusted EBITDA decreased to RMB 471.4 million from RMB 745.1 million in H1 2022, with the adjusted EBITDA margin falling from 18.2% to 14.4%, and Non-IFRS profit attributable to equity holders was RMB 603.1 million, down from RMB 666.0 million, as the company provides these non-IFRS measures, which exclude items like share-based compensation and investment-related gains/losses, to offer a clearer view of its core operational performance Other Financial Data | Metric | H1 2023 (RMB '000) | H1 2022 (RMB '000) | | :--- | :--- | :--- | | EBITDA | 372,213 | 600,560 | | Adjusted EBITDA | 471,354 | 745,058 | | Adjusted EBITDA Margin | 14.4% | 18.2% | | Net Cash | 7,541,645 | 6,555,723 | | Capital Expenditures | 99,296 | 136,603 | Reconciliation of IFRS to Non-IFRS Profit (Attributable to Equity Holders) | (RMB '000) | H1 2023 | H1 2022 | | :--- | :--- | :--- | | **Reported Profit** | **376,680** | **228,545** | | Share-based compensation | 70,892 | 116,659 | | Net loss from investments and acquisitions | 147,219 | 305,897 | | Amortization of intangible assets from acquisitions | 10,085 | 20,059 | | Tax effects | (1,757) | (5,165) | | **Non-IFRS Profit** | **603,119** | **665,995** | [Capital Structure, Liquidity and Financial Resources](index=16&type=section&id=Capital%20Structure%2C%20Liquidity%20and%20Financial%20Resources) The Group maintained a strong and healthy financial position, with net cash increasing to RMB 7.54 billion as of June 30, 2023, the asset-liability ratio decreasing to 17.0%, the current ratio improving to 361.6%, a zero gearing ratio with no outstanding borrowings and RMB 1.77 billion in undrawn banking facilities, and free cash flow for the period of RMB 475.7 million - The asset-liability ratio decreased from **21.0%** at year-end 2022 to **17.0%** as of June 30, 2023[27](index=27&type=chunk) - Net cash increased to **RMB 7.54 billion** from **RMB 7.09 billion** at the end of 2022[28](index=28&type=chunk) - The gearing ratio was **zero**, with no borrowings as of June 30, 2023, compared to a **2.3%** ratio at year-end 2022[28](index=28&type=chunk)[29](index=29&type=chunk) - Free cash flow for H1 2023 was **RMB 475.7 million**[28](index=28&type=chunk) [Employees and Subsidiaries](index=18&type=section&id=Employees%20and%20Subsidiaries) As of June 30, 2023, the Group had approximately 1,720 full-time employees, primarily based in China, and its key subsidiary, New Classics Media (新麗傳媒), which focuses on TV and film production, recorded revenue of RMB 543.6 million and a net profit of RMB 172.0 million attributable to equity holders in H1 2023 - As of June 30, 2023, the Group had approximately **1,720 full-time employees**[32](index=32&type=chunk) - For H1 2023, subsidiary New Classics Media recorded revenue of **RMB 543.6 million** and profit attributable to equity holders of **RMB 172.0 million**[33](index=33&type=chunk) [Financial Information](index=19&type=section&id=Financial%20Information) [Consolidated Statement of Comprehensive Income](index=19&type=section&id=Consolidated%20Statement%20of%20Comprehensive%20Income) This statement details the Group's revenues, costs, and expenses, leading to a profit for the period of RMB 376.0 million, a 61.9% increase from RMB 232.3 million in H1 2022, primarily driven by lower sales & marketing expenses and a shift from net other losses to net other gains, with basic earnings per share at RMB 0.37, up from RMB 0.23 in the prior year period Condensed Consolidated Statement of Comprehensive Income (RMB '000) | Item | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Revenue | 3,283,026 | 4,087,214 | | Gross Profit | 1,604,762 | 2,146,326 | | Operating Profit | 310,948 | 251,209 | | Profit before income tax | 425,589 | 340,436 | | Profit for the period | 375,979 | 232,276 | | Profit attributable to equity holders | 376,680 | 228,545 | | Total comprehensive income for the period | 447,241 | 343,137 | - Basic earnings per share was **RMB 0.37**, compared to **RMB 0.23** in H1 2022. Diluted earnings per share was **RMB 0.37**, compared to **RMB 0.22** in H1 2022[36](index=36&type=chunk) [Consolidated Statement of Financial Position](index=21&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2023, the Group's total assets stood at RMB 22.37 billion, a slight decrease from RMB 22.73 billion at year-end 2022, while total liabilities decreased to RMB 3.81 billion from RMB 4.78 billion, consequently increasing total equity to RMB 18.56 billion, with key assets including RMB 7.41 billion in intangible assets (mainly goodwill) and a strong cash and deposits position Condensed Balance Sheet - Assets (RMB '000) | Asset Category | Jun 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Non-current Assets** | **10,790,143** | **10,258,566** | | Intangible assets | 7,413,232 | 7,421,639 | | Investments in associates and joint ventures | 1,112,888 | 1,008,754 | | **Current Assets** | **11,583,942** | **12,475,912** | | Cash and cash equivalents | 3,359,906 | 5,545,766 | | Term deposits | 913,947 | 1,848,660 | | Trade receivables and notes | 1,820,841 | 2,048,930 | | **Total Assets** | **22,374,085** | **22,734,478** | Condensed Balance Sheet - Equity & Liabilities (RMB '000) | Equity & Liability Category | Jun 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Total Equity** | **18,563,573** | **17,954,722** | | **Non-current Liabilities** | **606,912** | **796,000** | | **Current Liabilities** | **3,203,600** | **3,983,756** | | Borrowings | – | 417,876 | | Trade payables | 1,032,440 | 1,203,873 | | **Total Liabilities** | **3,810,512** | **4,779,756** | | **Total Equity and Liabilities** | **22,374,085** | **22,734,478** | [Consolidated Statement of Changes in Equity](index=23&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Equity) Total equity increased from RMB 17.96 billion at the start of the year to RMB 18.56 billion as of June 30, 2023, primarily driven by the profit for the period (RMB 376.7 million attributable to equity holders) and other comprehensive income of RMB 71.2 million - Total equity attributable to company's equity holders increased from **RMB 17,957 million** to **RMB 18,563 million** during H1 2023[40](index=40&type=chunk) [Consolidated Statement of Cash Flows](index=25&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) The Group generated RMB 615.6 million in net cash from operating activities, while net cash used in investing activities was significant at RMB 2.38 billion, largely due to investments in financial assets, and net cash used in financing activities was RMB 466.4 million, mainly for repayment of borrowings, resulting in a net decrease in cash and cash equivalents of RMB 2.23 billion during the period Condensed Consolidated Statement of Cash Flows (RMB '000) | Cash Flow Category | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Net cash generated from operating activities | 615,638 | 706,767 | | Net cash (used in)/generated from investing activities | (2,382,543) | 106,106 | | Net cash used in financing activities | (466,370) | (674,036) | | **Net (decrease)/increase in cash and cash equivalents** | **(2,233,275)** | **138,837** | | Cash and cash equivalents at beginning of period | 5,545,766 | 4,528,412 | | **Cash and cash equivalents at end of period** | **3,359,906** | **4,735,717** | [Notes to the Interim Financial Information](index=26&type=section&id=Notes%20to%20the%20Interim%20Financial%20Information) The notes provide detailed breakdowns and explanations for the figures in the primary financial statements, including the definition of operating segments (Online Business and Copyright Operation), a disaggregation of revenue by product line and timing, a breakdown of expenses by nature, and details on intangible assets, primarily goodwill from past acquisitions, also covering share-based payment plans, receivables aging, and other critical accounting policies [Note 5: Segment Information](index=28&type=section&id=Note%205%3A%20Segment%20Information) The Group's operations are divided into two reportable segments: Online Business (including paid reading, advertising, and game distribution) and Copyright Operation and Other (including production and licensing of film/TV, book sales, and self-operated games), with the Chief Operating Decision-Maker assessing performance based on segment revenue and gross profit - The Group has two reportable segments: Online Business and Copyright Operation and Other[51](index=51&type=chunk) - For H1 2023, Tencent was the only customer contributing over **10%** of the Group's total revenue[55](index=55&type=chunk) [Note 10: Earnings Per Share](index=33&type=section&id=Note%2010%3A%20Earnings%20Per%20Share) Basic earnings per share (EPS) for H1 2023 was RMB 0.37, calculated based on a net profit of RMB 376.7 million and a weighted average of 1,006.6 million shares, with diluted EPS also at RMB 0.37, considering the potential dilutive effect of restricted share units and share options Basic EPS Calculation | Item | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Net profit attributable to equity holders (RMB '000) | 376,680 | 228,545 | | Weighted average number of ordinary shares ('000) | 1,006,602 | 1,011,137 | | **Basic EPS (RMB per share)** | **0.37** | **0.23** | [Note 12: Intangible Assets](index=35&type=section&id=Note%2012%3A%20Intangible%20Assets) As of June 30, 2023, the Group's intangible assets had a net book value of RMB 7.41 billion, with the largest component being goodwill, valued at RMB 6.63 billion, allocated to the Online Business (RMB 3.72 billion) and the acquired TV and film business (RMB 2.92 billion), and management concluded that no impairment loss was necessary for the period - Goodwill of **RMB 6.63 billion** is the largest component of intangible assets[67](index=67&type=chunk) - Management performed an impairment test on goodwill related to the acquired TV and film business and concluded no impairment was required for H1 2023[68](index=68&type=chunk)[69](index=69&type=chunk) [Note 18: Trade Receivables and Notes Receivable](index=42&type=section&id=Note%2018%3A%20Trade%20Receivables%20and%20Notes%20Receivable) Net trade and notes receivables stood at RMB 1.82 billion, with the aging analysis showing that RMB 952.2 million (approximately 52%) of the net balance is within 3 months, while RMB 727.0 million (approximately 40%) is aged between 6 months and 2 years Aging Analysis of Net Trade and Notes Receivables (RMB '000) | Aging Period | Jun 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Within 3 months | 952,191 | 1,513,045 | | 3 to 6 months | 141,643 | 122,045 | | 6 months to 1 year | 434,227 | 190,646 | | 1 to 2 years | 244,498 | 162,705 | | Over 2 years | 48,282 | 60,489 | | **Total** | **1,820,841** | **2,048,930** | [Other Information](index=49&type=section&id=Other%20Information) [Dividend and Corporate Governance](index=49&type=section&id=Dividend%20and%20Corporate%20Governance) The Board of Directors has decided not to declare an interim dividend for the six months ended June 30, 2023, and the company confirms its compliance with all applicable provisions of the Corporate Governance Code and the required standards for securities transactions by directors during the period, with the Audit Committee having reviewed the unaudited interim results and the effectiveness of the risk management and internal control systems - The Board decided not to recommend the payment of an interim dividend for H1 2023[96](index=96&type=chunk) - The company has complied with all applicable code provisions of the Corporate Governance Code for the period[97](index=97&type=chunk) - The Audit Committee has reviewed the unaudited interim results for H1 2023[98](index=98&type=chunk)