中国电影行业：为电影价值链的重新启动构建中国的票房前景

1、Global Research22 April 2020China Movie SectorFraming Chinas box office outlook for a movie value chain rebootCinemas potential re-opening in May suggests -43% YoY 2020E box office rev To assess Chinas box office potential after a movie value chain reboot, we frame three scenarios on key assumptions

2、 time taken to ease regulations, summer holiday timing/length, and government subsidies, among others. In our base case, we expect cinemas to resume operations in early May, leaving time to capture the summer season. We estimate -43% YoY revenue growth in Chinas 2020 box office to Rmb36.6bn, as the

3、industry gradually turns positive after September. But given movie distributors need one to two months to market new movies HYPERLINK l _bookmark7 (pivotal question #1) and consumers need some warm-up time, we do not expect a V-shaped recovery once regulations ease.Investors should be mindful of dow

4、nside risk for alternative scenariosAlthough under an upside scenario (decrease by 37% to Rmb40.5bn) Chinas box office would be less affected, we believe investors should be more mindful of a possible downside scenario, given the timing of the potential re-opening is sensitive to summer season oppor

5、tunities. Assuming no regulatory easing till June or July and a shorter summer holiday, box office revenues in July and August could be down by 64%. As the summer holiday is most important in H2, this could imply a full-year box office decline of 59%. Besides, cinema operators have higher liquidity

6、risks and small companies are more vulnerable; government subsidies are important for them to survive this difficult time (see HYPERLINK l _bookmark10 pivotal question #2).Consumer demand and film slate could double box office revenue in 2021EWe think COVID-19s adverse impact is a short-term shock f

7、or Chinas movie industry and expect a 102% box office revenue recovery in 2021. UBS Evidence Labs COVID-19 Impact Consumer PulseCheck Survey suggests solid demand for offline entertainment, including watching movies at theatres. This, along with the release of more high-quality movies, should suppor

8、t a recovery. Competition wise, we do not expect online to become mainstream near term. Neither a one-off sales model, nor a revenue-sharing model is likely to generate attractive profits for content producers.Cinemas suffer the most; producers/distributors more resilientCinemas are more vulnerable

9、due to higher fixed costs, while movie producers and distributors have more flexibility. We maintain our Buy rating on Maoyan based on its leading position in online ticketing market and strengthening presence in movie distribution (link). And we are Neutral on IMAX China and China Film with higher

10、exposure to the cinema operation business.Internet ServicesChinaEquitiesZhijing LiuAnalyst S1460515120001 HYPERLINK mailto:zhijing.liu zhijing.liu+86-213-866 8847Corrine Hu, CFAAnalyst S1460518100003 HYPERLINK mailto:corrine.hu corrine.hu+86-213-866 8875Jerry Liu Analyst HYPERLINK mailto:jerry.liu j

11、erry.liu+852-2971 7493Navin KillaAnalyst HYPERLINK mailto:navin.killa navin.killa+852-2971 7594 HYPERLINK /investmentresearch /investmentresearchThis report has been prepared by UBS Securities Asia Limited. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 17. UBS does and seeks to do bus

12、iness with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.China Movie S

13、ectorUBS Research THESIS MAP a guide to our thinking and whats where in this reportMOST FAVOREDLEAST FAVOREDMaoyanN.A.PIVOTAL QUESTIONSQ: How long will it take for Chinas movie sector to recover?We believe it will take two to three months for Chinas movie value chain to normalize, once the resumptio

14、n of cinemas is approved. Cinema distributors need one to two months to prepare the marketing of new movies, and consumers need some additional warm-up time to be comfortable sitting in theatres.moreQ: Is there is a risk of liquidity issues in the sector?Overall, leading listed companies are better-

15、positioned than small operators such as individual cinemas, as listcos have stronger cash positions and larger financing resources. Cinema operators have the highest liquidity risk along the value chain, given fixed costs account for a larger proportion of their cost structures.moreUBS VIEWLooking a

16、t our key assumptions, such as the time taken to ease regulations, timing/length of the summer holiday, and government subsidies, among others, we frame three possible scenarios. For our base-case scenario, we expect cinemas to resume operations in early May, leaving enough time to capture the summe

17、r season window. We estimate Chinas box office revenue to decrease by 43% YoY to Rmb36.6bn, as the industry gradually turns to positive growth after September. But given movie distributors need one to two months to prepare the marketing of new movies and consumers need some warm-up time, we do not e

18、xpect a V-shape recovery soon after regulations ease. Long term, we think the adverse impact from the COVID-19 outbreak is a short-term shock for Chinas movie industry and expect a 102% recovery in box office revenues in 2021.EVIDENCE1) All cinemas in China ceased operations in late January and defi

19、ned as high-risk confined space, cinemas have not yet received resuming-operation approval; 2) some regional film administrations (FA), like Beijing FA and Shanghai FA, already announced financially supportive policies in March. And on 3 April, the China Film Administration (CFA) announced that it p

20、lans to exempt China Film Development Fund contributions and the special tax on the movie industry, which usually accounts for 8.3% box office receipts; 3) UBS Evidence Labs COVID-19 Impact Consumer PulseCheck Survey in February and April suggested solid demand for offline entertainment including wa

21、tching movies at theatres.WHATS PRICED IN?Share prices of Chinas movie companies are down 23.5% on average in 2020 YTD, and we think some adverse impacts are recognized by the market. However, given uncertainties in the progress of COVID-19 control globally, investors still debate on upside/downside

22、 risks.Scenario analysisWe now expect a 43% decrease in Chinas box office revenue in 2020Amid the continued suspension of Chinas cinemas since late January, we now model a 43% YoY decrease in Chinas 2020E box office revenue to Rmb36.6bn.In our base-case scenario, we assume regulations ease in early

23、May. And given both movie distributors and consumers need time to warm-up (check our HYPERLINK l _bookmark7 #1 HYPERLINK l _bookmark7 pivotal question: How long will it take for Chinas movie sector to recover?), we model a gradual three-stage recovery in Chinas movie industry HYPERLINK l _bookmark4

24、(Figure 5), which we believe will take two to three months.We also lay out important swing factors and upside/downside scenarios in HYPERLINK l _bookmark2 Figure 3 and HYPERLINK l _bookmark4 Figure 5. We think more prudential regulations could lead to considerable downside risks HYPERLINK l _bookmar

25、k1 (check our analysis).Figure 1: UBS model of Chinas movie sectorUBS model fo r Chinas movie box o fficeCAGRMetr icsUn it2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 19- 24 E Box o fficeRmb bn 44.145.755.961.064.236.673.979.986.492.58% DomesticRmb bn27.126.730.137.941.123.844.347.951.855.

26、56%ForeignRmb bn16.919.025.829.531.934.537.010%No. o f scr een s31,627 41,179 50,776 60,079 69,787 71,183 76,877 81,490 85,565 89,843 5% Net Add7,3239,5529,5979,3039,7081,3965,6954,6134,0754,278Avg. Number o f scr eens 27,966 36,403 45,978 55,428 64,933 70,485 74,030 79,184 83,527 87,704

27、 6%Net Add6,6158,4389,5759,4509,5065,5523,5455,1544,3444,176Attendancemn1,2601,3701,6201,7161,7279651,9112,0262,1482,2555%ASPRmb34.9833.3634.5135.5337.1537.8938.6539.4240.2141.012%Attendance per screen00039.833.331.928.624.713.624.924.925.125.10%Box o ffice p er scr eenRmb mn1.58 1.26 1.22 1.10 0.99

28、 0.51 0.96 0.98 1.01 1.03 1% GrowthBox office49%4%22%9%5%-43%102%8%8%7%Domestic68%-2%13%26%8%-42%86%8%8%7%Foreign26%12%36%-11%0%-45%131%8%8%7%Screen No.30%30%23%18%16%2%8%6%5%5%Avg. screen no.31%30%26%21%17%9%5%7%5%5%Box office per screen14%-20%-3%-10%-10%-48%87%2%3%2%Attendance51.8%8.7%18.2%5.9%0.6

29、%-44.1%98.0%6.0%6.0%5.0%ASP-2.1%-4.6%3.5%3.0%4.5%2.0%2.0%2.0%2.0%2.0%Attendance per screen16.7%-16.5%-4.1%-10.5%-13.4%-45.2%83.3%0.0%1.0%0.0%RatioDomestic as %62%58%54%62%64%65%60%60%60%60%Source: Wind, UBS estimatesFigure 2: Monthly box office estimates (base case; Rmb m)12,00010,0008,0006,0004,000

30、2,00020%0%-20%-40%-60%-80%-100%0Jan Feb Mar Apr May JunJul Aug Sep Oct Nov Dec-120%20192020YoY%Source: Wind, UBS estimatesSwing factors and upside/downside scenariosRegulation is crucial for the movie sectors recovery this year and the following are some key factors we think matter the most:Figure 3

31、: 2020 box office outlook swing factorsSwing factorUpside scenarioBase case scenarioDownside scenarioTime to ease regulationLate AprilEarly MayJune or JulyStarting time of summer holidayEarly JulyMid JulyLate July or Early AugSummer holiday length8 weeks6 weeks4 weeks or lessWeekend length2.5 to 3 d

32、ays2 days1 daySubsidyHeavyMediumLightSource: UBS estimatesTime taken to ease regulations and summer holiday length: The summer holiday is the most important time window in H220, which in 2019 accounted for 27.5% box office revenue. So whether Chinas movie sector could recover by then is critical for

33、 this years box office outlook.But as we discuss in HYPERLINK l _bookmark7 #1 pivotal question: How long will it take for Chinas HYPERLINK l _bookmark7 movie sector to recover?, both movie companies and consumers need a few weeks warm-up time. If cinemas cannot resume operations in June, we can hard

34、ly expect a decent box office performance in this coming summer.Besides, the length of the summer holiday also matters. China national college entrance examinations have been delayed by one month from June to July. And the spring term has also been delayed by one or two months HYPERLINK l _bookmark8

35、 (Figure 11) in different provinces. Assuming a three-month spring term as usual, we estimate the summer holiday will be four to six weeks shorter in 2020.We model only Rmb4.9bn box office revenue in July and August combined in our downside scenario, implying a 64% YoY decrease.Weekend length: Box o

36、ffice revenue over the weekends usually accounts for half of weekly revenues. In some provinces like Jiangxi, government already announced 2.5-day weekends in Q220. While in some cities of Sichuan, K-12students can only have one-day weekends in the spring term. Prolonged weekends will undoubtedly be

37、nefit the movie sector. By contrast, if the government chooses to shorten weekends in H220 to offset decreased working time in H120, we believe the movie sector will suffer. According to our estimates, the average box office revenue per weekend day is 150% higher than that per weekday. So 2.5- to 3-

38、day weekends could boost weekly box office revenue by around 8% to 15% and a 1-day weekend would lead to 15% lower weekly box office revenue.Subsidies: Subsidies are likely to play a crucial role in 2020. Firstly, movie companies, especially cinema operators with high liquidity risks and producers w

39、ith high inventory risks, need financial support to survive this tough time (check HYPERLINK l _bookmark10 #2 pivotal question: Is there is a risk of liquidity issues in the sector?). Some regional film administrations (FA), like Beijing FA and Shanghai FA, already announced financially supportive p

40、olicies in March. And on 3 April, the China Film Administration (CFA) announced that it plans to exempt China Film Development Fund contributions and the special tax on the movie industry, which usually accounts for 8.3% box office receipts. Secondly, governments consumption coupons could help boost

41、 consumers willingness to watch movies.Figure 4: Proposed subsidies in some regionsCitySubsidyNationalExemption of China Film Development Fund and special taxBeijingSpecial epidemic financial support to cinemas; Subsidy for delayed movies produced in BeijingShanghaiRmb10 per ticket subsidy (on hold)

42、Special epidemic financial support to cinemas/distributors Tax reduction/refundJiangsuTax reduction/refundSpecial financial support from cultural development fundZhejiangRmb10m subsidy to cinemasSpecial financial support from film development fundSichuanRmb3m subsidy per movie and Rmb150k subsidy pe

43、r script Rmb200k distribution subsidy per movieRent reductionGuangdongRmb48.88m subsidy to 1,337 cinemasSource: Government website, UBSThree-stage recovery in H220E and upside/downside scenariosWe think Chinas movie sectors recovery will take about two to three months.Figure 5: 2020 box office outlo

44、ok upside/base/downside scenariosThree phases of movie value chain ramp-upPhase onePhase twoPhase threeBox office (Rmb bn)YoY%GrowthOccupation rate* Box office rate*Movies to screenLess than 70%Less than 50%Classic and long-tailed moviesBetween 70% to 90%Between 50% to 80% Tier-2 moviesMore than 90%

45、More than 80% Tier-1 moviesUpsideMayJuneJuly40.5-36.9%BaseJuneJulyAug36.6-43.0%DownsideLate JulyLate AugLate Sept26.2-59.2%*Benchmark: Average daily number in 2019. Number of showings is 348,658 and box office is Rmb176mn Occupation rate = current number of showings / Avg. daily number in 2019Box of

46、fice rate = current box office / Avg. daily box office in 2019Source: UBS estimatesFigure 6: 2020 box office revenue estimates upside/downside (Rmb m)9,0008,0007,0006,0005,0004,0003,0002,0001,0000Jan Feb Mar Apr May JunJul Aug Sep Oct Nov Dec20%0%-20%-40%-60%-80%-100%-120%DownsideUpsideUpside YoY%Do

47、wnside YoY%Source: UBS estimatesPotential three-stage recovery in H220EIn the first two to four weeks, only a few ready-to-be-released movies, such as classic and long-tailed movies which do not require much marketing, are likely to be available in theatres. And both cinema occupation rates and box

48、office revenues are likely to remain at low level.In four to eight weeks, we expect a mild recovery in movie attendance numbers and box office receipts. Distributors are likely to release some high- quality movies to attract more moviegoers and prepare to launch blockbusters.In eight to 12 weeks, if

49、 blockbusters are successfully launched, and achieve more than Rmb1bn box office receipts for example, we think the movie sector could return to normal afterwards.Besides, Hong Kongs recovery during the SARS outbreak could be a reference point for a recovery cycle. In 2003, it took around two to thr

50、ee months for box office revenues to return to pre-epidemic levels. The number of SARS cases peaked in early April 2003 and box office revenue reached US$2.8m in the first week of July 2003 (versus US$1.9m per week in 2002 and US$2.6m in the last week before the 2003 spring festival).Below are the k

51、ey assumptions for our three scenarios for a movie value chain ramp-up in China over the next quarters:Base case: we expect regulations ease in early May and the movie sector gradually recovers in June and July. After two months warm-up, we expect the box office to return to 90% of normal levels in

52、August and fully recover in September/October.Upside: we assume regulations ease in late April and a strong slate will support robust box office growth in H220. We model a 4% decrease during summer time and a 1% box office revenue increase in H220. As a result, we assume 2020 full- year box office r

53、evenue could decrease by 36.9% YoY to Rmb40.5bn.Downside: we assume more prudential regulations. A shorter summer holiday could lead to 64% box office revenue decrease during summer time. We also set lower expectation on H220 box office revenue performance: a 29% decrease versus 5% decrease in our b

54、ase-case scenario. And we assume 2020 full-year box office revenue could decrease by 59.2% to Rmb26.2bn.but we model a 102% box office revenue recovery in 2021EWe think the adverse impact of COVID-19 is a one-off shock for Chinas movie sector in 2020. And we model 102% box office revenue growth in 2

55、021, backed by sufficient content supply. We also do not expect significant competition risk from online channels in the short term.Figure 7: Box office revenue recovery in 2021E102%-43%100.0120%80.080%60.040%40.00%20.0-40%0.0201820192020E2021E2022E2023E-80%Box office (Rmb mn)YoY%Source: Wind, UBS e

56、stimates-Sufficient content supply in 2021/22E. Although there could be some delayed openings of new films in 2020, we think this will not impact the film slate in2020/21E. As shown in HYPERLINK l _bookmark6 Figure 7, several delayed blockbusters could be released next year, which will provide some

57、support. And according to company announcements, movie producers like Enlight Media and Huaxi Media have abundant inventories that are screen-ready. Besides, as we discuss in our HYPERLINK l _bookmark10 pivotal question #2. Is there is a risk of liquidity issues in the sector?, content producers hav

58、e lower liquidity risk. Assuming their inventory could be released on time in H220 or 2021, we believe there should not be significant financial concerns that will jeopardize content supply.Figure 8: Partial pipeline in 2020/21ENameYearDateGenreRegionDetactive Chinatown 32020TBCComicsDomesticJiang Z

59、iya2020TBCAnimationDomesticThe Rescue2020TBCActionDomesticDuo Guan2020TBCDramaDomesticVanguard2020TBCActionDomesticMy first love is 18 years old2020TBCLoveDomesticLove you forever2020TBCLoveDomesticBig fish and Begonia 22020TBCAnimationDomesticHome sweet home2020TBCActionDomesticShock wave 22020TBCA

60、ctionDomesticFeng Shen2020TBCFantasyDomesticWen Nuan De Bao Bao2020TBCComedyDomesticHello, Li Huan Ying2020TBCComedyDomesticTop Gun:Moverick2020Jun-26ActionImportedPeter Rabbit 22020Aug-07AnimationImportedDoraemon: Nobitas New Dinosaur2020Aug-07AnimationImportedWonder Woman 19842020Aug-14ActionImpor