中國(guó)電影：回到聚光燈下

1、By:GaryGuoandHanEquity ResearchReportMarch HYPERLINK / China CinemaInitiate coverage: Back in the spotlighta a &reportbepartWhy read this reportChinas film industry is on the rise again, which is good news for the countrys big cinema chains; we forecast box office revenue will rise at a CAGR of 11.8

2、% over2019-21eSmaller cinemas are losing money, so industry consolidation is inevitable; the industry leaders are also increasing their reach across the value chainInitiate coverage of three cinema chains Wanda Film (Buy), Hengdian Entertainment (Buy) and Shanghai Film (Hold) and upgrade China Film

3、to Buy from Hold; prefer WandaFilmContents HYPERLINK l _bookmark0 Agood screenplay3 HYPERLINK l _bookmark1 Industryoutlook13 HYPERLINK l _bookmark2 CompanySection21 HYPERLINK l _bookmark3 Wanda Film (002739CH)22 HYPERLINK l _bookmark4 Hengdian Entertainment HYPERLINK l _bookmark4 (603103CH)34 HYPERL

4、INK l _bookmark5 China Film (600977 CH)44 HYPERLINK l _bookmark6 Shanghai Film (601595CH)51 HYPERLINK l _bookmark7 Disclosureappendix60 HYPERLINK l _bookmark8 Disclaimer64A good screenplayHigh-calibre films, a quality viewing experience, favourable policy initiatives and a growing audience away from

5、 the big citieswe believe the outlook for Chinas big cinema chains is bright. The leaders will increase their market share as competition squeezes out smaller chains in this fragmented sector; they are also expanding into other parts of the film industry. We forecast box office takings will rise at

6、a CAGR of 11.8% over 2019-21e. In this report, we initiate coverage of three cinema chains Wanda Film (Buy), Hengdian Entertainment (Buy) and Shanghai Film (Hold) and upgrade China Film to Buy (from Hold).Back in the spotlightChinas film industry is onthe rise againIts nearly a year since we publish

7、ed our thematic report on Chinas film makers. We highlighted that box office takings had stalled in 2016 for the first time after an influx of hot money pushed up the quantity of films, but not the quality HYPERLINK /R/10/QSMLX7L (China Media A Hollywood moment for Chinas film- HYPERLINK /R/10/QSMLX

8、7L makers, 18 May 2018). Audiences were not impressed. But since that brief blip, Chinas film industry is on the rise again. Theres a wider range of quality big-budget domestic movies, which can now compete on level terms with the latest imported Hollywoodblockbusters.on in a 8.0% in in a in We a ov

9、er in for a of be by in in as as of an of Look at the new government policies that will help industry leaders gain marketshare.Explain why audiences in smaller cities will drive growth in box office takings. The percentage of box office revenue in third and fourth-tier cities grew from 36.16% in H1

10、2016 to 41.16% in H12018.Show why diversifying business across the film industry is soimportant.Assess the other market forces driving industry consolidation. For example, a lot of smaller cinemas are loss-making and about 300 cinemas closed in first 10 months of2018.Discuss competition from streami

11、ng services and explain why we think the risks are being overstated.Initiate on three big cinema companies Wanda Film (Buy), Hengdian Entertainment (Buy) and Shanghai Film (Hold). We explain why we prefer WandaFilm.Upgrade China Film to Buy from Hold and raise our target price to RMB19.90 from RMB16

12、.50 on higher net profitforecasts.The industry outlookThere are now around 60,000 cinemas across the countryis in it a it is in a in in of it a Chinas box office revenue rose 8.0% in 2018 to RMB56.6bn (about USD8.41bn). Domestic films accounted for 62% of the total, up from 54% in 2017, reflecting h

13、igher production standards. One of the main factors driving this growth is the rapid increase in the number of cinemas. There are now around 60,000 screens across the country, with 9,000 being added in 2017. Between 2015 and 2018, the number of film screens in China has risen at a CAGR of 22.7%.All

14、this means that competition is now at a whole new level and we believe that industry consolidation is inevitable in this fragmented market for the following reasonsWe believe China cinema industry will enter a period of consolidation. Intense competition would force small and medium-sized cinemas to

15、 phase out of the market and enhance the market share of top players. Our view is based on the following reasons:Increasing saturation: The rise in the number of cinema screens has resulted in a sharp decrease in revenue per screen, from RMB1.39m in 2015 to RMB1.01m in2018.The squeeze is on: Accordi

16、ng to Top Thinktank, 84% of the cinemas in China pulled in box office revenue of less than RMB10m and 63% less than RMB5m. This means a lot of smaller cinemas are loss-making and, according to a report by 36Kr, about 300 cinemas closed in first 10 months of2018.Out with the old: New cinemas, normall

17、y run by the big chains, have advanced facilities and can provide a better consumer experience. We believe old cinemas cantcompete.Policy incentives: In December 2018, the State Film Administration stated that to build a cinema chain a company should have “no less than 50 cinemas with a controlling

18、stake or no less than 300 screens” and “box office of no less than RMB500m from its cinemas with controlling stake”. Out of the 48 cinema chains in China, only about 20 can fully meet these requirements, in ourview.International comps: The top five cinema chains in China accounted for 46.1% of box o

19、ffice takings in 2018. Its a different story in developed markets. For example, in the US, AMC, Regal and Cinemark control 59% of the market in terms of the number ofscreens.Exhibit 1. Number of screensinChinaExhibit 2. Per screen box office revenue(RMBm)02013 2014 2015 2016 2017 2018ScreenYoY183982

20、430418398243043248741179507766007910%0%1.391.18 1.21201320142015201620172018Source: EntGroup, HSBCQianhaiSecuritiesSource: EntGroup, HSBC QianhaiSecuritiesNumber of screens: lower-tier cities are the main growth enginesWe estimate 10,000 new screens will be installed annually in 2019-20We use the nu

21、mber of cinema screens per 100,000 population to measure screen density in different countries. In developed markets like the US, France and Australia, screen density is between 9.2 and 12.5. In China, the average is 7.2 but it varies by city tier. Using a weighted average, it is 10.6 in first-tier

22、cities (Beijing, Shanghai, Shenzhen and Guangzhou), 9.6 in second-tier cities, and 6.4 in other lower-tier cities. First and second-tier cities in China have almost reached the level of developed countries, while lower-tier cities are still catching up.According to guidelines released by the State F

23、ilm Administration in December 2018, “the number of screens in urban cinemas is set to total over 80,000 by 2020”. Based on this target, we estimate 10,000 new screens will be installed annually in 2019-20, a CAGR of c15%. The main drivers are rising urban populations in some second-tier cities due

24、to migrant inflows and urbanization, and increasing “screen density” in lower-tier cities.Chinas urbanisation rate was 59.58% in 2018. According to National Plan on Population Development 2016-2030 published by the State Council, Chinas population is expected to reach 1.42bn by 2020, with 60% of the

25、 population classified as urban. We have done a sensitivity analysis based on an urbanization rate of between 59% and 62% in 2020. If the number of screens rises to 80,000 in 2020, the number of cinema screens would be in the range of 9.5-9.1 per 100,000 population, on par with the current level in

26、developed countries.Exhibit 3. Number of cinema screens per 100,000 population by country and region4.31050Source: EntGroup, National Bureau of Statistics of China, HSBC Qianhai Securities（data of China in 2018, data for other countries in 2017）Exhibit 4. Sensitivity analysis impact of urba

27、nisation rate on “screen density”UrbanisationUrbanisationrate59%60%61%62%Number of cinema screensper100,0009.1populationSource: HSBC Qianhai Securities estimatesTicket prices set to riseChinas average film ticket price remained stable during 2015-18. We think this will start to change this year. Dur

28、ing the 2019 Lunar New Year holiday, ticket prices hit a new high, averaging RMB44.5, up 11.8% y-o-y. Although prices tend to be higher during the holiday period, this year is different. The regulator has prohibited film producers and distributors from offering ticket subsidies to attract higher aud

29、iences. We think this will help push up prices throughout 2019.Exhibit 5. Average ticket price vs. ticket price during Lunar New Year holiday (RMB)44.539.544.539.535.036.333.134.437.739.835.34030201002016201720182019Ticketprice(Wholeyear)Ticket price(SpringFestival)Source: EntGroup, HSBC Qianhai Sec

30、uritiesThe price increases will probably be limited though. Cinema tickets are already quite expensive in China compared to other countries on a relative basis. The ratio of the average film ticket price to per capita disposable income is 0.13%, compared to just 0.05% in the US andAustralia.We expec

31、t Chinas average ticket price to grow by c2% annually over the next three years. If we use the US as a reference point, the average ticket price grew at a CAGR of 2.2% over 2009-18 and reached cUSD9.1 (cRMB61) in 2018.Exhibit 6. US cinema ticketprice(USD)Exhibit 7. Ticket price as % ofdisposableinco

32、me per capita1086420TicketpriceYoY0.125%0.125%0.055%0.046%ChinaUSAustraliaSource: Box office mojo, HSBCQianhaiSecuritiesSource: Box office mojo, screenaustralia, HSBC QianhaiSecuritiesThe growth of the market: 2019-21e box office CAGR of 11.8%We estimate the growth rate of Chinas film market from th

33、ree perspectives urban population, per capita attendance, and average ticket price.The urban population is rising steadily. It totalled 831m in 2018, with an urbanisation rate of 59.57%. Based on the growth rate of the last three years, we estimate this will rise to 63% in 2021e.We estimate the aver

34、age ticket price will rise from RMB35.3 in 2018 to RMB37.5 in 2021e, a CAGR of2.0%.In2018,peoplewenttothecinemaanaverageof2.1timesayear,wellbelowtheaverage of 3.4-3.8 in North America. We expect per capita attendance in China to reach 2.6 by 2021e, a CAGR of 7.4% for 2018-21e, driven by audiences in

35、 lower-tiercities.Exhibit 8. Per capita attendance in China and North America1.10.83210201320142015US201620172018Source: MPAA, World Bank, NBS, EntGroup, HSBC Qianhai SecuritiesNote: We calculate per capita attendance in China and the US by urban population and total population, respectivelyIn our b

36、ase-case scenario, between 2018 and 2021 we expect the urban population to grow 6.1%, the average ticket price 6.2%, and per capita attendance 23.8%. We estimate that in 2021e, Chinas box office will hit RMB86bn, up from RMB60.7bn in 2018, a CAGR of 11.8%. We believe the increase in per capita atten

37、dance is the key driver for future box office growth.Exhibit 9. Chinas box office growth forecast (target year: 2021)ScenarioBase-caseBull-caseBear-caseTotal population in China (bn)Urbanisation rate63%65%61%Annual per capita attendanceAverage ticket price (RMB)37.53936Box office (RMBbn)8699.473.8CA

38、GRSource: NBS, EntGroup, HSBC Qianhai Securities estimates11.8%17.3%6.2%Global cinema market: majority of growth driven by AsiaThe global box office has grown from USD28bn in 2008 to USD41bn in 2017, a CAGR of 4.4%. The majority of this growth was driven by Asia Pacific countries, whose share of glo

39、bal revenues grew from 27% in 2014 to 31% in 2017. According to PWC, the global box office should grow by 4.4% over the next five years.Exhibit 10. Global box office trend5%25%5%25%6%24%6%8%8%9%27%28%30%31%35%34%30%30%80%33%33%33%33%31%35%36%34%31%31%20122013201420152016US/CanadaEMEAAPAC2017Source:

40、MPAA, HSBC Qianhai SecuritiesExhibit 11. Global attendance per capita (2017)2.62.04.03.02.01.00.0SKoreaAustraliaAmericaFranceChinaIndiaGermanyJapanSource: Cineworld, HSBC Qianhai SecuritiesInitiate coverageWanda Film is Chinas No.1 cinema chain in terms of market shareChinas film market wobbled in 2

41、016, which led to stocks in the sector being de-rated. We think the industry is bottoming out, as is the countrys broader media and entertainment sector. The large cinema chains with quality management capable of diversifying their businesses across the value chain should benefit from box office gro

42、wth and industry consolidation. We initiate coverage of Wanda Film, Hengdian Entertainment and Shanghai Film, and upgrade China Film from Hold to Buy.Wanda Film (002739 CH, Buy; TP RMB28.5): Chinas largest cinema chain. Its merchandise, advertising and other non-box-office revenue are all contributi

43、ng to steady margin growth. The company is acquiring Wanda Media to access the whole industry value chain. We expect Wanda Films 2018/2019/2020e net profit to be RMB1,289m/RMB1,564m/RMB1,841m, implying y-o-y growth of-15.0%/21.4%/17.7%.Hengdian Entertainment (603103 CH, Buy, TP RMB28.0): This cinema

44、 chain focuses on third and fourth-tier cities, which are the growth drivers of box office revenue at the industry level. We forecast that net profit in 2019/2020/2021e will rise to RMB344m/RMB393m/RMB453m, implying y-o-y growth of 7.2%/14.4%/15.1%.Shanghai Film (SFC, 601595 CH, Hold, TP RMB15.0): B

45、y integrating downstream and upstream businesses, the company covers the entire film distribution and screening value chain from distributor to integrated cinema chain and operator. We forecast that 2018/2019/2020e net profit will be RMB243m/RMB280m/RMB317m, implying y-o-y growth of -5.5%/15.3%/13.1

46、%.China Film (600977 CH, Buy, TP RMB19.9): Company is involved in the whole industry value chain, from film production, distribution and cinemas, to film and TV services. China Film is one of only two Chinese companies licensed to distribute imported films and works with film companies from all over

47、 the world. It has produced blockbusters such as Warcraft, Kung Fu Panda 3, and The Great Wall in co-operation with leading foreign producers. We raise our 2018/2019/2020e net profit estimates by 0.5%/6.9%/11.6% to RMB1.101bn/RMB1.325bn/ RMB1.554bn and upgrade the rating to Buy from Hold.Our order o

48、f stock preference is Wanda Film, followed by China Film, Hengdian Entertainment and Shanghai Film. Wanda Film is Chinas No.1 cinema chain in terms of market share and the company is traversing the whole value chain by expanding into film-making, distribution, and screening.Share price catalystsWe t

49、hink the film industry is bottoming out and entering a period of prosperity. We expect the quality and sophistication of the film industry to further improve over the next 2-3 years, and cinema chains shouldbenefit.Online ticketing platforms started out as a portal linking the audience to cinemas. T

50、hey are now much more than that. Using the vast quantity of data acquired, they have expanded across the whole value chain into services related to screening, film production and distribution.The fragmented market will consolidate. We believe smaller cinema chains will be squeezed out and the indust

51、ry leader will gain marketshare.The banning of ticket subsidies should help accelerate the consolidation processbecause:previously,smallcinemachainsoftenattractedlargeraudiencesbyofferinglowerticket prices. They cant do this anymore; and 2) without subsidies, online ticket platforms may lose custome

52、rs, giving large cinema chains an opportunity to build their membership programmes and enhance customerstickiness.Key industry risks:Fluctuation in the quality of films: If the quality of films does not meet audience expectations, cinema chain revenues could be lower than expected.Rising cinema rent

53、s: The rising cost of commercial buildings and intensifying competition in cinema investment could lead to higher cinema rents, dragging down profit margins.Where we are different from the marketBroadly speaking, our revenue and net profit forecasts are below consensus. The biggest difference is for

54、 Wanda Films net profit, where we are 15.2% below the Street for 2019e and 12.3% below for 2020e. We think this is because our estimates of its box office revenue are more conservative.Exhibit 12. HSBC Qianhai Securities estimates vs consensus (RMBm)TickerCompanyRMBm_ HSBC QianhaiSecuritiesestimates

55、 Windconsensus HSBC Qianhai vs Wind consensus2018e2019e2020e2018e2019e2020e2018e2019e2020e002739 CHWanda Film Revenue14,10416,05218,18914,10116,41218,4230.0%-2.2%-1.3%Net profit1,2891,5641,8411,2931,8622,124-0.3%-16.0%-13.3%600977 CHChinaFilmRevenue10,04811,88213,76710,12712,16813,894-0.8%-2.3%-0.9%

56、Net profit1,1011,3251,5541,4471,3661,564-23.9%-3.0%-0.6%601595 CHShanghai Film Revenue1,2251,3631,5031,1731,4411,6984.5%-5.4%-11.5%Net profit2432803172422913640.3%-3.8%-13.0%2019e2020e2021e2019e2020e2021e2019e2020e2021e603103 CHHengdianEntertainmentRevenue3,1403,5784,0413,1703,6203,789-0.9%-1.1%6.7%

57、Net profit344393453380440465-9.5%-10.8%-2.5%Source: Wind, HSBC Qianhai Securities estimatesExhibit 13. Cinema comparable tableCompanyTickerRating Target Closing Upside Mktcap ADTV PE EPS PB ROE EV/EBITDA EBITDADividendpricepriceCAGR(%)Growthyield (%)RMBRMBUSDm USDm 2018e 2019e 2020e 2018-20e 2018e 2

58、019e 2020e 2019e2018e2019e2019e2019eDomesticWanda Film002739 CHBuy28.5021.4233%5,5324529.324.120.519.4%3.02.72.511.815.312.321.1%1.0Hengdian603103Hengdian603103CHBuy28.0025.1511%1,6712935.433.128.910.7%5.04.33.814.915.514.221.4%0.9ChinaFilm600977CHBuy19.9017.0617%4,6702728.924.020.618.6%11.810.07.92

59、0.8%1.4Shanghai601595CHHold15.0014.930.5%8181223.019.917.614.4%12.012.710.618.4%1.9Average2829.225.321.915.8%3.33.02.712.613.411.320.4%1.3OverseasCinemarkCNK US4,71940.117.016.515.415.0%2.8%3.4CineplexCGX CN1,17110.119.517.017.19.0%5.5%7.1CineworldCINELN5,4254.711.511.110.414.5%25.0%4.8PVRPVRLIN1,10

60、60.544.133.727.329.8%14.315.912.724.8%0.1INOXINOL 4700.330.725.020.136.9%3.53.02.612.013.010.924.2%0.0Average11.124.520.718.121.1%12.610.69.316.5%3.1Source: Wind, HSBC Qianhai Securities estimates for our four covered stocks. Pricing date as of 26 MarchValuation methodologyFor Wanda Film and Hengdia