According to the Zhutong Finance APP, China International Capital Corporation released a research report stating that as third-quarter performance results are gradually disclosed, the market's pessimistic sentiment towards the lackluster box office since the summer season is gradually dissipating, while the logic of the film industry being driven by high-quality content remains unchanged. Looking ahead to the 2025 Spring Festival season, top films continue to be produced, key films are scheduled for release, and the demand for viewing is being driven by high-quality content. The 2025 Spring Festival season may benefit from the pull of key films with box office elasticity, potentially boosting the recovery of viewing demand and revitalizing industry confidence.

China International Capital Corporation's main views are as follows:

The Spring Festival season is one of the important periods throughout the year, with top films continually being produced.

The Spring Festival season, characterized by its long duration and strong family-friendly atmosphere, is a battleground for film companies. According to Artisan, the box office revenue over 8 days during the 2024 Spring Festival season amounted to 8.183 billion yuan, reaching a new high compared to previous years. According to Maoyan Professional Edition, 6 out of the top 10 films in the overall Chinese box office rankings are from the Spring Festival season, with 50% of films grossing over 3 billion yuan coming from the Spring Festival season. The industry believes that in recent years, besides the natural increase in carrying capacity of the Spring Festival season itself, the highlighting of its time slot effect has attracted high-profile film producers to join in, making the Spring Festival season appealing to viewers, especially suitable for families watching together, and possessing a high box office elasticity.

Due to insufficient supply of high-quality content, the box office was lackluster in 2024, but the market has already had sufficient expectations.

From the beginning of 2024 until now (as of October 28), according to Artisan, the national accumulated box office revenue including service fees was 38.3 billion yuan, a 22.1% decrease year-on-year. Among them, the box office revenue for 3Q24 including service fees was 10.9 billion yuan, a 43.7% decrease year-on-year. According to the performance announcements of movie companies that have been disclosed, the third-quarter performance of the film industry has seen a significant year-on-year decline. The industry forecasts that under a neutral scenario, the box office revenue including service fees for 2024 would be 43 billion yuan, a 21.7% decrease year-on-year. The industry believes that the current valuation of the film sector already fully reflects the market's pessimistic sentiment towards the lackluster box office, and more attention will be paid to the marginal elasticity brought by the key films of the 2025 Spring Festival season.

Looking ahead to the 2025 Spring Festival lineup, there is a rich reserve of key films, and high-quality content may boost confidence.

According to the Maoyan professional version, "Deification Part II: War Fire of Xiqi" and "Boonie Bears: The Wild Life" have been scheduled for release on January 29, 2025 (Chinese New Year's Day). The company determines that subsequent film reserves include "Detective Chinatown 1900," "Nezha Reborn," "Jiaolong Action," "A Little Red Flower 2," "The Heroic Legend of the Condor Heroes: The Great Heroes", etc. The company believes that viewing demand is driven by high-quality content, and the 2025 Spring Festival lineup may benefit from the boost of key films driving box office elasticity. It also recommends paying attention to specific holiday arrangements and the progress of subsequent film scheduling.

Valuation and Recommendations

Maintain coverage of the company's profit forecasts, ratings, and target prices unchanged.

Recommend Maoyan Entertainment (the leading online movie ticketing platform, a leading film distributor) (01896), Ali Pictures (a major movie ticketing platform; main distributor and participant in "Deification Part II") (01060), Beijing Enlight Media (main invests and control "Nezha Reborn") (300251.SZ), Wanda Film Holding (leading company in film investment on the distribution side) (002739.SZ), Pay attention to Bona Film Group (main investor and controller of "Jiaolong Action") (001330.SZ), Hengdian Entertainment (company investing in the distribution side) (603103.SH), and Shanghai Film (601595.SH).

Risk Warning: Lower-than-expected quality and quantity of content supply, piracy propagation, tightening regulations.