Chinese stock brokerages are turning more bullish on the recovery outlook for the mainland movie industry, after the latest Hollywood blockbuster Avatar 2 helped boost box-office takings and end years of pandemic shutdown.
Analysts at Guosen Securities and Caitong Securities said they expect cinema operators to outperform the broader market next year, aided by signs of Beijing’s zero-Covid pivot since November. Avatar: The Way of Water, released last Friday, is a springboard to recovery, they added.
“Avatar 2 powered an exponential surge of movie ticket sales,” and the momentum is likely to extend to the Lunar New Year holiday next month, Zhang Heng and Xia Yan at Guosen said in a report. “The recovery is getting stronger now, and some hiccups along the way will not have significant impacts on the uptrend.”
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James Cameron’s much-anticipated sequel to the 2009 movie grossed over 500 million yuan (US$71.6 million) a week after its run in mainland cities last Friday, according to local ticketing platform Maoyan. The movie is also on its way to become China’s Top 10 box-office movie with an estimated 1 billion yuan of ticket sales, it estimated.
Avatar: The Way of Water, reported to have cost Walt Disney US$350 million, has grossed US$556 million worldwide, making it the ninth-highest grossing film this year. It has been nominated for the Best Motion Picture – Drama and Best Director at the 80th Golden Globe Awards.
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The movie premiered in London on December 6 and was released in the US on December 16. Its screenings crashed equipment in some theatres across Japan, running into technical difficulties during its critical opening weekend in the country, according to a Bloomberg report.
China’s box-office takings sank to an 11-year low in November as a flare-up in infections kept film-goers at home. Sales have since jumped 40 per cent in December compared from a month ago, and have recovered to about 47 per cent of the pre-pandemic level, the Guosen analysts said in their report on Monday.
Despite the new-found optimism, some economists cautioned China’s economic recovery will be bumpy. Surging infections are likely to dampen consumption. With dented confidence about future income and home equity, Chinese households may rein in spending, economists at Nomura said earlier this month.
Household income could slow down next year with the Chinese economy continuing to regain its growth momentum, Guolian Securities analyst Zheng Lei wrote in a note. “People are likely to cut non-essential consumption if that is the case, and the film and media industry might not recover as fast as the market expected,” he said.
Still, Caitong Securities is confident the relaxation of Covid-19 measures will gradually bring people back to the cinemas, brightening the outlook for upstream film production houses. Investors should keep an eye on industry leaders such as Bona Film Group, the broker said earlier this week.
Filmmaker Mango Excellent Media and Beijing Enlight Media are among Guosen’s top picks. They are likely to outperform the market by over 20 per cent next year. Theatre operator Wanda Film Holdings and state-owned film distributor China Film Group will also top the market by 10 to 20 per cent, the broker added.
Their stock picks have had a mixed year. China Film Group has risen 2.7 per cent this year while the rest slumped, according to Bloomberg data. Bona Film Group has lost 52 per cent from its peak in August, while shares of Mango Excellent Media, Beijing Enlight Media and Wanda Film tumbled by 9 to 48 per cent this year.
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