FAST NEWS: Maoyan’s Profit Havled as Pandemic Weighs on Movie Distribution

The latest: Maoyan Entertainment (1896.HK), China’s main online movie ticketing platform, issued a profit warning Wednesday, forecasting its net profit for the first half of the year would range between 130 million yuan ($19 million) and 180 million yuan, down 53.5% to 66.4% from 387 million yuan in the same period last year.

Looking up: Since June 2022, with the gradual improvement of Covid-19 pandemic prevention and control measures in China, the entertainment industry has slowly rebounded. The operating rate of cinemas nationwide has recovered to over 80%, which is favorable to the company’s business.

Take Note: Due to the impact of the resurgence of Covid-19 pandemic during the first half, China’s cinema operating rate was lower than the same period last year, especially from March to May when the national cinema operating rate was once below 50%, and studios adjusted and postponed the release schedule of films. As a result, the company’s first-half revenue decreased by 30.5% to 36.1% year-over-year to 1.15 billion yuan to 1.25 billion yuan.

Digging Deeper: The film industry was affected by the closure of entertainment venues in many Chinese cities since the outbreak of the Covid-19 virus in 2020, but the epidemic stabilized somewhat last year, and many film-related companies saw their bottom line rebound. Maoyan, for example, saw its revenue jump 143% year-on-year to 3.32 billion yuan last year, and turned a loss into a profit of 369 million yuan. However, with the return of the epidemic in the second quarter of this year, the company’s business performance was again challenged. Due to the slow growth of its core ticketing business, the company said it will shift its focus to promoting its content-development business, such as participating in the production, distribution and promotion of movies.

Market Reaction: The company’s shares followed the broader market to open higher on Thursday, closing up 5.7% at the midday break at HK$7.05 – around the midpoint of the past 52 weeks. But it still trades at the lower part of its 52-week range.

Translation by Jony Ho

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