Chinese online companies rush to list in Hong Kong: net profit after deducting non-recurring gains and losses has been consecutive losses, and stock prices have fallen 40% from recent highs.

Source: Radar Finance

Radar Finance Original Content | By Li Yihui | Edited by Shenh hai

Against the backdrop of sustained rising heat in the HK stock IPO market, Chinese Online has recently submitted documents to the Hong Kong Stock Exchange.

According to the application materials for this issuance and listing published on the HKEX website, Chinese Online is an AI-driven leading digital entertainment platform. It mainly provides online literature content in the domestic market, and short dramas overseas, aiming to build an ecosystem of next-generation digital content across the full industry chain.

The prospectus cites data from Frost & Sullivan showing that, based on 2024 revenue, the company ranks third among copyright-driven content platforms in China’s online literature market, with a market share of 1.6%. In overseas short drama platforms, Chinese Online ranks eighth based on revenue as of September 2025, and ranks second based on monthly active users during the first seven months after going live.

However, compared with its impressive overseas expansion results, Chinese Online’s performance is not flawless. According to Tonghuashun iFinD data, from 2021 to 2024, Chinese Online achieved attributable net profit of RMB 98.7915 million, -RMB 362 million, RMB 89.4369 million, and -RMB 243 million, respectively; and achieved non-GAAP attributable net profit of RMB 23.4389 million, -RMB 393 million, -RMB 38.3426 million, and -RMB 271 million, respectively, with only 2021 being profitable.

According to the company’s 2025 performance forecast, Chinese Online expects its net loss attributable to shareholders of listed companies in 2025 to be between RMB 580 million and RMB 700 million. It expects a net loss of RMB 579 million to RMB 699 million after deducting non-recurring gains and losses. By this point, the company’s non-GAAP net profit has been in the red for four consecutive years.

In addition, Chinese Online has also been frequently cutting its holdings through sales by shareholders and senior management. On February 3, Chinese Online announced that, within three months after 15 trading days from the disclosure date of this announcement, the directors Zhang Fan and Xie Guangcai (director and executive vice president), Wang Jingjing (deputy general manager, board secretary, and chief financial officer) and Yang Ruizhi (chief operating officer) plan to collectively reduce their holdings by no more than 657,900 shares. Before this, the relevant shareholders had already carried out multiple rounds of share reductions.

What’s worth noting is that on March 27, Chinese Online closed at RMB 25.94, down about 40% from its recent high.

Short drama overseas expansion surges, but does not conceal a downturn in performance

The information shows that Chinese Online was founded in 2000. In the early years, it created the 17K Novel website (formerly known as Together to Read Novels) to enter the original online literature space. Later, in January 2015, it listed on the ChiNext board of the Shenzhen Stock Exchange, becoming the first digital publishing company to list in China’s A-share market.

After listing, Chinese Online kept expanding into new businesses. Based on digital publishing, it transformed into outputting various content formats such as online literature, audiobooks, comics, AI manhua dramas, animation, and short dramas, and expanded its business footprint from China to a global content platform.

According to the prospectus, in terms of online literature and related businesses, as of the latest practicable date, Chinese Online has more than 5.6 million digital content items, mainly covering online literature works. The company mainly provides users with rich online literature and audio content through third-party channels and its own platforms. This core business contributed revenue of RMB 480 million for the nine months ended September 30, 2025, accounting for 47.5% of the company’s total revenue.

In terms of short drama and IP derivative businesses, Chinese Online became one of the first batches of companies in China that produced and distributed short dramas as early as 2021.

In 2022, the company’s short drama revenue reached the RMB 100 million milestone. It also expanded into overseas short drama markets. As of the latest practicable date, the company’s overseas short drama application FlareFlow ranked first on the U.S. free entertainment app download chart in major mobile app marketplaces. It currently has more than 33 million registered users and provides about 52,000 short drama episodes.

In addition, Chinese Online selects high-quality IP from its digital content library and IP reserves for subsequent development, and adapts them into multiple forms, including comics, AI manhua dramas, animation, short dramas, films, and merchandise. The company generates revenue from these IP derivative products.

Data shows that within the nine months ended September 30, 2025, out of the company’s total revenue of RMB 1.011 billion, revenue from the short drama and IP derivative business reached RMB 474 million, accounting for 46.9% of the company’s total revenue.

However, based on the actual situation, as of last year, the overseas short drama industry was still in the stage of “race for market share,” with relatively high user-acquisition spending costs.

According to the company’s financial reports, in the first three quarters of 2025, Chinese Online generated operating revenue of RMB 1.01 billion, up 25% year over year; achieved attributable net profit of -RMB 520 million, down 177% year over year; and achieved non-GAAP attributable net profit of -RMB 520 million, down 149% year over year.

In response, Dongwu Securities believes that rising operating costs dragged down gross margin, while losses in the overseas business caused profit to decline. In the first three quarters of 2025, the company’s selling expenses increased 94% year over year to RMB 660 million, mainly due to a significant increase in overseas business promotion expenses; research and development expenses grew 42% year over year to RMB 53 million, reflecting increased R&D investment in the overseas business. Asset impairment losses expanded 496% year over year, mainly due to an increase in provisions for inventory price declines. The main reasons for the profit decline include intensified operating losses in the overseas business, along with non-recurring factors such as reduced investment income from financial products and losses from the disposal of real estate.

On January 13, Chinese Online released a performance forecast. The company expects that its net loss attributable to shareholders of listed companies in 2025 will be between RMB 580 million and RMB 700 million, and its net loss after deducting non-recurring gains and losses will be between RMB 579 million and RMB 699 million.

As for the reasons for the change in performance, Chinese Online said that during the reporting period, in order to expand the scale of its overseas business, the company increased promotion investment in its overseas short drama business. Related businesses in 2025 are in the investment period, resulting in losses. In addition, during the reporting period, the expected impact of non-recurring gains and losses on net profit for the period is approximately -RMB 0.7 million.

Actually, when viewed over a longer timeframe, Chinese Online’s profitability performance has not been stable. Tonghuashun iFinD data shows that from 2021 to 2024, Chinese Online achieved attributable net profit of RMB 98.7915 million, -RMB 362 million, RMB 89.4369 million, and -RMB 243 million, respectively; and non-GAAP attributable net profit of RMB 23.4389 million, -RMB 393 million, -RMB 38.3426 million, and -RMB 271 million, respectively, with only 2021 being profitable.

The company’s consistently high selling and marketing expenses are an important reason for the poor profit performance. The latest prospectus shows that the company’s selling and marketing expenses in 2023, 2024, and the nine months ended September 30, 2025 accounted for 34.2%, 40.1%, and 65.3% of revenue, respectively. The sharp increase for the period from 2024 to the first nine months ended September 30, 2025 is mainly attributable to the expansion of the FlareFlow business scale during the period after it carried out active marketing and user acquisition activities.

To change this “cash burn” situation in the business, Chinese Online stated that the company will improve production and distribution efficiency for its overseas short drama business and control selling and marketing expenses for the overseas short drama business.

For example, the company expects to gradually increase the number of overseas short dramas produced at its Zhuhai Hengqin production base in China (trial operations starting in January 2026). In the past, the company mainly produced overseas short dramas in the United States. Compared with overseas short dramas shot at the U.S. base, it is expected that, while ensuring content quality at a similar level, the cost per overseas short drama shot at the Hengqin base will be significantly lower.

In the long run, the company expects that about 50% of its overseas short dramas will be shot and produced at the Hengqin production base, which is expected to significantly reduce the proportion of production costs in revenue.

In addition, Chinese Online will also improve the ratio of overseas short drama business selling and marketing expenses to revenue continuously through measures such as expanding its high-quality short drama reserves quickly via FlareFlow, cooperating with more leading KOL platforms, and increasing the use of AI application technologies, thereby continuously improving the company’s overall profitability.

Frequent cash-outs by executive shareholders

In the secondary market, new application formats represented by AI manhua dramas are giving rise to entirely new business models and market space in the content production field. Riding the surge in its stock price, Chinese Online’s stock price once hit a recent high of RMB 43.8.

It is worth noting that as Chinese Online’s stock price keeps setting new highs in recent years, some shareholders of the company “can’t sit still.”

On February 3, Chinese Online announced that within three months after 15 trading days from the disclosure date of this announcement, director Zhang Fan, director and executive vice president Xie Guangcai, deputy general manager and board secretary and chief financial officer Wang Jingjing, and chief operating officer Yang Ruizhi plan to collectively reduce their holdings by no more than 657,900 shares. The reason for the reduction is personal capital needs.

As of now, the above share reduction plan is still ongoing. Radar Finance noted that as early as 2023, some of the above executive personnel began share reductions.

On February 22, 2023, Chinese Online announced that the company’s director Zhang Fan, director and executive vice president Xie Guangcai, deputy general manager and board secretary Wang Jingjing, deputy general manager and chief financial officer Yang Ruizhi, and director Zhang Weilì’s share reduction plans were all completed. In total, they reduced 1.5837 million shares, accounting for 0.22% of the total share capital.

On March 27, 2024, Chinese Online announced that the company’s director Zhang Fan, director and executive vice president Xie Guangcai, chief operating officer and chief financial officer Yang Ruizhi, deputy general manager and board secretary Wang Jingjing, and deputy general manager Zhang Weilì’s share reduction plans were all completed. In total, they reduced 1.1875 million shares, accounting for 0.16% of the total share capital.

On August 28, 2025, the company announced that the share reduction plans of director Zhang Fan, director and executive vice president Xie Guangcai, chief operating officer Yang Ruizhi, deputy general manager and board secretary and chief financial officer Wang Jingjing, were all completed, totaling 876,900 shares reduced.

In addition, on November 4, 2025, Chinese Online announced that the share reduction plan of shareholder Shenzhen Litong Industrial Investment Fund Co., Ltd. and Shanghai Yuewen Information Technology Co., Ltd. (hereinafter referred to as “Shanghai Yuewen”) had been completed. The total shareholding proportion decreased from 8.98% to 6.991%,

Tianyancha shows that after equity penetration, the actual controller of Shanghai Yuewen is Ma Huateng, whose shareholding proportion is 60%.

What’s worth noting is that on February 11, Chinese Online hit a recent high of RMB 43.8 intraday. Then it entered a downward channel, with the latest closing price at RMB 25.94, down about 40% from the recent high.

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责任编辑：杨红卜