Blockbusters and virtual reality could help IMAX China turn its fortunes around, say analysts

Fan-favourite blockbusters and virtual reality cinema experiences could paint a more positive picture for 3D movie operator IMAX China next year, says Nomura.

Profits for China’s film sector – the second biggest movie market in the world after the United States – have slowed this year due to a shortage of big movies and a trend towards watching movies at home, with ticket sales slipping 16 per cent in the third quarter after enormous growth in the past few years.

But in a recent research note, Nomura analysts Richard Huang and Stella Xing tipped 2017 to be the year of box office recovery and upgraded IMAX China to a buy rating.

IMAX China, which only has 4.5 per cent of the mainland cinema market share, closed at HK$39.70 on Monday after slipping 22 per cent slip from August to mid-November, but that’s predicted to rebound to HK$45 next year.

IMAX China’s profits are expected to improve from an estimated 4 per cent growth this year, to 42 per cent next year, back in line with the 46 per cent compound annual growth rate between 2013-2015. That will be thanks to big movies due to hit the screens in 2017, like the latest in the Transformers series and Fast 8, which follows Fast and Furious 7’s 2.43 billion yuan box office take for IMAX in 2015.

“Good movies are necessary to drive industry growth,” Huang said. “We like the long-term growth story of the China movie industry,” he said, although he noted that some stocks – like IMAX China and Huace – were tipped to do better than others.