CICC released a research report stating that due to investments in new businesses such as short-form content, the firm has lowered LINMON MEDIA's (09857) 2025 Non-IFRS net profit forecast by 60.6% to RMB 42.93 million. Considering the expected capacity release for long-form dramas in 2026, CICC raised the 2026 Non-IFRS net profit forecast by 48.7% to RMB 173 million. The current price corresponds to 9.5x 2026 Non-IFRS P/E. Switching to a 10x 2026 Non-IFRS P/E valuation, the target price has been raised by 60.6% to HK$5.3, representing 5.6% upside from the current price.

The company announced its 1H25 results with revenue of RMB 401 million, up 108% year-over-year. Non-IFRS net profit reached RMB 14.44 million, turning from loss to profit year-over-year, falling within the guidance range of RMB 13-15 million and meeting market expectations.

CICC's main viewpoints are as follows:

**Committed to Premium Drama Development with Gradual Capacity Enhancement; Short-form Content Revenue Exceeds RMB 50 Million**

Long-form Dramas: The company aired "A Dream in Books" in 1H25 and started production and wrapped filming on 2 projects. CICC believes the company's long-form drama production pace is progressing steadily. Looking ahead, the firm believes platforms still have strong demand for premium dramas, and pricing for top-tier content is expected to remain stable.

Short-form Content: In the first half of 2025, the company's short-form content capacity grew rapidly, with cumulative online content exceeding 3,400 minutes, up 70% year-over-year. Current scale reaches 16 productions per month, with multiple works showing outstanding performance. The company's short-form content revenue exceeded RMB 50 million in 1H25. CICC believes the company is steadily advancing its short-form content business with a focus on ROI at the current stage.

**Overseas Business Focuses on Long-form Drama Distribution with Active Cost Reduction and Efficiency Enhancement**

Overseas: In 1H25, the company's overseas revenue exceeded RMB 33 million, approximately 2.5 times that of 1H24. During 1H25, the company's licensed drama "A Dream in Books" launched on multiple overseas platforms including iQiyi International, WeTV, Viu, and YouTube. Meanwhile, the company adjusted its distribution strategy for library content, expanding distribution in Vietnam, Malaysia, and Russia. The long-form drama "Nothing But Thirty: Bangkok" began airing on August 28.

Profitability: The company's 1H25 gross margin was 25.2%, improving year-over-year. Due to cost reduction and efficiency enhancement initiatives, both sales and administrative expenses decreased year-over-year. CICC expects management expenses to remain disciplined for the full year.

**2026 Capacity Expected to Gradually Release; Focus on Long-form Drama Business Elasticity**

Looking ahead to the remainder of 2025, "Return at Midnight" began airing on August 18. According to announcements, long-form drama reserves "Moonlight Over a Thousand Miles" and "Acting" are in post-production, while "A Thought of Jiangnan," "Confrontation," "Ask the Heart 2," "Small Town Good Medicine," and "Today is Sun Shower" are in preparation stages. CICC recommends continued attention to the company's long-form drama capacity release pace and profit improvement elasticity.

Risk factors include uncertainties in content launch timing and performance, intensifying industry competition, and liquidity risks.