In-depth Analysis of Financial Sustainability of China Online (300364.SZ)'s Overseas Short Drama Business

I have now collected sufficient data, and I will provide you with a systematic and comprehensive analysis report.

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According to China Online’s 2025 annual performance forecast, the company expects a net loss attributable to shareholders of listed companies of

for the full year, a significant increase of 139%-188% compared to the same period last year (RMB 243 million); the range of net loss after deducting non-recurring gains and losses is [1][2].

Notably, the loss in the fourth quarter showed a

: the net profit and net profit after deducting non-recurring gains and losses for Q4 are expected to be a loss of RMB 59.59 million to RMB 179.59 million, a sharp narrowing of 39% to 80% month-on-month, indicating an initial trend of reducing losses in the business[1].

Financial Indicators	2023	2024	2025 (E)
Net Profit Attributable to Parent (RMB 100 million)	-3.01	-2.43	-5.8~-7.0
Net Profit After Deducting Non-recurring Gains and Losses (RMB 100 million)	-3.50	-2.71	-5.79~-6.99
Operating Revenue (RMB 100 million)	~14	~15	~12-14
Sales Expense Ratio	~45%	~65%	87%

Data source: Compiled from company announcements and brokerage research reports[1][2][3]

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China Online’s sales expenses in the first three quarters of 2025 reached as high as

, surging year-on-year, and the sales expense ratio soared to [2][3]. This figure means:

For every RMB 100 of operating revenue, RMB 87 is spent on marketing and promotion

This high sales expense ratio mainly stems from the following cost structure:

Cost Item	Amount/Rate	Industry Comparison
User Acquisition Cost via Paid Traffic	12-14 USD/user	Industry average: 15-20 USD/user
Production Cost per Short Drama	150,000-180,000 USD/title	Year-on-year increase of over 20%
Traffic Acquisition Cost per Short Drama	Approx. 1.5 million USD/title	10 times the production cost
Payback Period	60-90 days	High pressure on capital occupation

Industry data shows that there is a harsh formula for overseas short dramas:

, with an input-output ratio as high as 1:10[3].

Company	Sales Expense Ratio	Profit Status	Business Model
China Online	87%	Loss-making	ReelShort(IAP)
Kunlun Tech (DramaWave)	Approx. 70%	Loss-making	IAA+IAP Hybrid
Dianzhong Tech (DramaBox)	Approx. 60%	Loss-making	IAA-oriented
Netflix	Approx. 15%	Profitable	Mature Subscription Model

It can be seen that

(usually 15-25% for the media industry), reflecting the arms race characteristic of “burning money for market share” in the current overseas short drama track[3][4].

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Despite pressure on financial data, China Online’s strategic layout in the overseas short drama market has achieved remarkable results:

Business/Indicator	Data	Industry Position
ReelShort’s U.S. Market Share	29.13%	Ranked 1st
FlareFlow’s Cumulative Downloads	19 million (7 months after launch)	3rd among global short drama apps
Countries/Regions Covered	177	Leading in globalization
Supported Languages	11 types	-
ReelShort’s H1 2025 Revenue	USD 130 million	1st in the industry
Monthly Active Users (MAUs) of the Platform	600,000	-
2024 Revenue of CMS Subsidiary	RMB 2.9 billion	-

Data source: SensorTower, various company announcements and brokerage research reports[1][3][4]

The overseas short drama market is in a period of explosive growth:

• First 8 months of 2025
  : The total revenue of the overseas micro-short drama market reached
  USD 1.525 billion
  , a year-on-year increase of
  194.9%
• Total downloads are approximately
  730 million
  , a year-on-year increase of
  370.4%
• Among 431 short drama apps worldwide,
  40 originate from Chinese enterprises
• The top 50 apps monopolize
  98.45%
  of the market share[1]

:

Platform	Parent Company	Market Share	Strategic Features
ReelShort	China Online (49.2%)	Approx. 29%	North American market + local original content + IAP model
DramaBox	Dianzhong Tech	Approx. 25%	Emerging markets + translated dramas + IAA model
ShortMax	Maple Leaf Interactive	Approx. 10%	Follower
DramaWave	Kunlun Tech	Approx. 8%	New Entrant

Data source: SensorTower and industry reports[3][4][5]

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Based on API data and results of financial analysis tools[0]:

Risk Indicator	China Online	Industry Benchmark	Risk Assessment
Asset-Liability Ratio	66.56%	32.11%	⚠️ High Risk
Current Ratio	0.83	1.5 (Safety Value)	🔴 Short-term Solvency Risk
Quick Ratio	0.54	1.0 (Safety Value)	🔴 Tight Liquidity
ROE(TTM)	-73.65%	8%	🔴 Severe Loss
Net Profit Margin (TTM)	-42.23%	-	🔴 Continuous Cash Burn
Operating Cash Flow	-RMB 173 million	-	🔴 Severe Mismatch

As of the end of Q3 2025, the company’s asset-liability ratio soared from

, far exceeding the industry average (32.11%), and debt risk has risen significantly[3]. Both the current ratio (0.83) and quick ratio (0.54) are below the safety thresholds, indicating:

1. Insufficient short-term solvency
   : The company may face pressure from tight capital chains
2. Weak asset liquidity
   : Quick assets are difficult to cover short-term debts
3. Excessive financial leverage
   : Increased debt burden and greater pressure from interest expenses

The company’s accumulated losses since its listing have exceeded

, and the loss in 2025 alone will account for more than 20% of the total[3]. This means:

• Per share net assets continue to be diluted
• Ability to withstand external economic fluctuations is weakened
• Shareholders’ equity continues to be diluted

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China Online’s overseas short drama model is based on the following logic:

[Logic in the Investment Phase]
High user acquisition cost via paid traffic → Growth in user scale → Formation of brand effect → Reduction in reliance on paid traffic → Achievement of profitability

However, the

of this model are:

1. The market space is large enough to accommodate initial investments
2. User retention and brand effect can reduce user acquisition costs in the later stage
3. The competitive pattern will eventually stabilize

Dimension of Challenge	Specific Performance
User Acquisition Cost Pressure	12-14 USD/user, which erodes profits despite being lower than the industry average
Rising Content Costs	Cost per short drama increased from 120,000-150,000 USD to 150,000-180,000 USD (+20%)
Long Payback Period	60-90 day payback period, with severe capital occupation
Intensified Competition	309 new apps launched in H1 2025 (+110% year-on-year)
Rise of Local Players	Local players such as Ukraine’s MyDrama and India’s KukuTV are accelerating their entry
Competition from Giants	Global giants such as Disney and TikTok are also laying out in the short drama track

According to industry research data:

80%-90% of overseas short dramas fail to recoup costs

[5]

Leading platforms are also facing losses:

• ReelShort’s H1 2025 loss was RMB 46.5115 million
• Kunlun Tech (DramaWave)'s net loss in the first three quarters was RMB 665 million

This indicates that

.

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Valuation Indicator	China Online	Interpretation of Abnormality
P/E (TTM)	-39.47x	No practical significance in a loss-making state
P/B	48.02x	Far exceeding the industry average (5x), reflecting market expectations for growth
Market Capitalization	USD 2.27 billion	Up 29.29% year-to-date, stock price performance deviates from fundamentals

The company’s P/B ratio is as high as 48 times, far exceeding the average level of the media industry (approx. 5 times), indicating that

and is willing to give a valuation premium for its strategic investments[0].

Despite pressure on fundamentals, China Online’s stock price performance is strong:

Period	Increase
1 Month	+30.76%
3 Months	+25.49%
6 Months	+15.75%
1 Year	+29.29%
3 Years	+232.91%

This deviation may stem from:

1. Overall valuation increase of the AI application sector
2. Market expectations for the company’s “globalization + AI” strategy
3. Speculation by short-term funds on concepts

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1. Q4 loss narrowing trend
   : The loss narrowed by 39%-80% month-on-month, indicating marginal improvement
2. Stable market share
   : ReelShort ranks first in the U.S. market, and FlareFlow is growing rapidly
3. Policy support
   : The 15th Five-Year Plan for Cultural Power Strategy encourages the export of cultural products
4. AI empowerment
   : The self-developed “COL XiaoYao” large model and AI content tool chain can reduce costs
5. First-mover advantage in globalization
   : Covers 177 countries and regions, forming channel barriers

1. Cash flow pressure
   : Negative operating cash flow and increased debt burden
2. Intensified industry competition
   : New players continue to enter, and traffic costs keep rising
3. Unverified profit model
   : No successful profit precedent in the industry
4. Doubts about user retention
   : Whether high user acquisition costs can be converted into long-term user value
5. Macroeconomic risks
   : Exchange rate fluctuations and geopolitics may affect overseas business

Indicator	Focus Direction	Turnaround Signal
Sales Expense Ratio	Whether it can drop from 87% to below 50%	Improvement in paid traffic efficiency
Asset-Liability Ratio	Whether it can stabilize below 50%	Controllable financial risks
Quarterly Net Profit	When to achieve single-quarter break-even	Business model verification
User Retention Rate	Whether 1-day/7-day/30-day retention improves	Product competitiveness
Market Share	Whether it can be maintained above 25%	Competitive barriers

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Dimension	Rating	Explanation
Financial Health	🔴 Poor	High leverage, tight liquidity, continuous losses
Business Growth	🟡 Moderate	Rapid user growth, but profitability not verified
Competitive Position	🟢 Strong	Leading platform with top market share
Valuation Rationality	🔴 Overvalued	P/B ratio of 48x, overdrawn future expectations
Comprehensive Rating	🟡 Hold	Risks and opportunities coexist

1. Industry reshuffling speed
   : If 80% of small and medium players exit, after the competitive pattern stabilizes, user acquisition costs via paid traffic are expected to decrease
2. User value conversion
   : Whether current user acquisition investments can be converted into long-term paying users and brand loyalty
3. AI cost reduction effect
   : Whether technology investments can substantially reduce content production and user acquisition costs
4. Cash flow management
   : Whether the company can maintain sufficient liquidity to support itself until the profit inflection point amid continuous losses

:

• The company is in a strategic investment period, and losses may further expand in the short term
• The asset-liability ratio has risen to 66.56%, so attention should be paid to debt repayment risks
• The sales expense ratio of 87% is significantly high, and the profit model has not been proven viable
• Intensified industry competition may lead to further deterioration of the input-output ratio

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[1] Securities Times - “China Online: Losses Narrowed Significantly in Q4 2025, AI + Globalization Strategy Lays Foundation for Growth” (https://www.stcn.com/article/detail/3591758.html)

[2] The Paper - “China Online Increases Promotion Investment in Overseas Short Drama Business, Expects Net Loss to Expand by at Least 139% Last Year” (https://m.thepaper.cn/newsDetail_forward_32376468)

[3] Tide News - “China Online Loses RMB 700 Million in a Year, All Spent on Overseas Paid Traffic Acquisition” (https://tidenews.com.cn/tmh_news.html?id=6968f8d64ab6530001e882ce)

[4] Soochow Securities - “In-depth Report on the Media Industry: Overseas Short Dramas, More Than Just “Netflix Alternatives”” (https://pdf.dfcfw.com/pdf/H3_AP202507161709998001_1.pdf)

[5] ChinaVenture - “Overseas Short Dramas Change Landscape in 3 Years: 80% Losses, Players Lose Money for Exposure?” (https://m.chinaventure.com.cn/news/78-20251111-388805.html)

[0] Jinling AI Financial Database - Real-time Market and Financial Analysis of China Online (300364.SZ)