Two leading companies in the Chinese entertainment industry have experienced big drops in share prices following a forecast report indicating weak performances for the first three quarters of this year, which analysts have attributed to the profit cycle of Chinese entertainment companies.
The shares of Huayi Brothers Media Corp, a Beijing-based film production company, fell 8.06 percent to close at 29.31 yuan, following a drop of 9.99 percent last Wednesday, almost hitting the daily down limit of 10 percent.
The shares of Beijing-based Enlight Media- Co Ltd closed at 45.88 yuan last Thursday, 4.18 percent down, after having slumped 10 percent to hit the daily limit Wednesday.
The performance of the two companies' shares are influenced by the forecast reports of the first three quarters, Hou Tao, vice president of EntGroup Inc, a Beijing-based consulting firm, told the Global Times Thursday.
Huayi Brothers released its forecast reports on the first three quarters Monday, predicting that the profit in the first three quarters would be between 403 million yuan to 430 million yuan, 200 percent to 220 percent up year-on-year.
However, considering the profit of 403 million yuan in the first half year revealed by the half-year report, Huayi Brothers' loss/profit for the third quarter might be between a loss of 301,100 yuan to a profit of 26.55 million yuan, the lowest since the second quarter of 2010, Securities Times said Thursday.
Similarly, Enlight Media's profit in the first half of this year increased 112.19 percent year-on-year to more than 172.8 million according to its half-year report. But its forecast report on the first three quarters of 2013 released on October 11 predicted that its profit growth rate would drop to between 60 and 90 percent year-on-year.
The third quarter is a dull season for new Chinese films, Yang Shuting, an analyst from EntGroup, told the Global Times Thursday, noting Chinese film producers do not produce much excellent films such as animation movies to attract adolescents, especially in the summer.
Chinese entertainment companies, especially in the film industry, are so young that they have distinct profitable and idle periods, Chen Shaofeng, deputy dean of the Institute for Cultural Industries at Peking University, told the Global Times Thursday.
Chinese entertainment companies' profits mainly come from the box office, and they are not rich enough to be the exclusive investor for a movie or invest in several movies at the same time, Chen said, therefore, there are peak and offpeak seasons for new movie releases and hence, profits.
Also, unlike major foreign companies such as Disney, Chinese companies do not earn much from film-related products such as DVD, dolls and theme parks, said Chen.
EntGroup has confidence in the Chinese film market, Hou said, noting that according to EntGroup's predictions, China's box office is expected to reach $11.3 billion in 2017, which would be higher than its estimate of $11.2 billion for the US.