The pandemic didn’t play favourites months ago when it dropped the curtain on China’s 64 billion yuan (US$9 billion) film industry. But when the curtain rises again, the industry’s giants will reclaim their starring roles and many bit players will find there’s no longer room for them on the stage, stock analysts predict. Large cinema chains with ample cash reserve will squeeze out smaller players and enjoy a bigger market share. Producers that can latch onto the rise of online film streaming will benefit. And ticketing platforms with light assets and low debt could also be among the first to recover. These factors provide reasons for investors to pay attention to this heavily battered sector, analysts say, even though traders should exercise caution as a full recovery may still be months away. “The short-term impact of the virus outbreak will be over eventually, but in the longer term, it could lead to a reshuffle in the industry and provide new opportunities,” said Liu Yan, analyst at Southwest Securities. Chinese cinemas ‘on their knees’ as Netflix, streaming sites gain viewers China’s film market – previously estimated to overtake that of the US this year – may be at its darkest moment now. Cinemas across China have been shut since late January, when the government confirmed human transmission of the coronavirus. An attempt by some operators to reopen in March was quickly quashed by Beijing out of fear over a resurgence in new infections, even as factories and restaurants resumed operations gradually. A flurry of gloomy first-quarter earnings guidance underscored the extent of the grave damage to the industry. Out of the 18 film-related companies listed in Shanghai and Shenzhen that have released forecasts recently, 11 expected to record a loss in the first three months. In Hong Kong, Alibaba Pictures, a film and television show producer backed by the e-commerce giant Alibaba Group, warned it could record a loss of up to 1.2 billion yuan for the financial year ended March due to the pandemic. IMAX China Holdings, the exclusive licensee of ultra-wide screen IMAX film technology in the region, also forecast a first-quarter loss of as much as US$28 million, reversing from a profit of US$11 million in the same period last year. (Alibaba owns the South China Morning Post .) Entertainment stocks suffered brutal losses as a result. Hong Kong-listed Maoyan Entertainment, China's biggest online movie ticketing platform, lost 37 per cent since a January high. Shenzhen-listed Wanda Film, China’s largest cinema chain owned by property mogul Wang Jianlin’s Dalian Wanda Group, saw shares plummet 45 per cent since late January. Investors and analysts are scrambling to identify which companies could survive less scathed from the months-long hibernation and benefit from an industry-wide shakeout and consolidation. Cinema chain Wanda Film is one such stock, widely favoured by analysts and predicted to be a beneficiary of the ongoing industry reshuffling. The company owns 656 cinemas in 230 cities across China, occupying a 13 per cent market share. It has ranked the first in terms of box office, audience number and market share for 11 years in a row, according to a report by China Galaxy Securities published on Tuesday. The Covid-19 outbreak accelerated the process of small, less profitable cinemas exiting the market, which is a boost for leading players, said Li Yanli, analyst at Western Securities. Wanda Film is available for offshore traders through Hong Kong’s Stock Connect programme. China’s cinema industry started to expand rapidly in 2011, adding about 1,000 new theatres each year since then. This means about 1,000 theatres, or 10 per cent of the total number, will have their rental lease expired in 2021, according to Li’s estimate. Some of the cinemas will have to wind down because they will no longer be able afford the soaring rent, and the outbreak has fastened this process. Large cinema chains like Wanda enjoy the advantage of better location and financing capability, and can thus better withstand the downturn and be able to swallow up the failed theatres with acquisition deals, she said. This will lift the overall profitability and efficiency of the industry, analysts say. “The outbreak is both a crisis and an opportunity for the cinema market, because it would fasten the pace of consolidation and force out excessive capacity,” said Liu of Southwest Securities. Coronavirus sank Hong Kong’s stock market into bear territory – just don’t tell some of its superstars on a big run-up Shenzhen-listed Guangzhou Jinyi Media, which owns over 100 theatres and plans to add 25 more this year, is also recommended by analysts from brokerages including Avic Securities. This stock is not available on Stock Connect yet. Another notable trend emerged during the outbreak is the rise of online film streaming. For example, Huanxi Media, a film and drama series producer, opted to release its comedy blockbuster Lost in Russia for free, after the film originally scheduled for the Lunar New Year was pulled along with six other movies as cinemas were closed. The company received at least 630 million yuan in payment from ByteDance for streaming its films on platforms including Douyin. Shares of Huanxi Media in Hong Kong spiked 43 per cent in one trading session on the heel of the announcement in late January. Even though its price has fallen back since then, the stock remains resilient amid big plunges in the sector and so far have fallen 6.7 per cent since the beginning of the year. This could open the gate of film producers releasing new movies on online platforms instead of cinemas, and create a new revenue channel for producers and platforms, Cao Xute, analyst at Shengang Securities said in a report published last week. The number of online-streamed films that achieved a revenue over 100 million yuan reached 22 in the first quarter, up from 4 in the same period last year, Cao said. Mango Excellent Media, a producer of TV shows and drama series that also operates an online streaming platform, is a hot stock heavily favoured by analysts. The company has close ties with the local TV station in central China’s Hunan province, which has produced one of the most watched channels in the country. (Mango is listed in Shenzhen and tradable through the Stock Connect.) Film-goers holed up at home have boosted the traffic of its streaming platform Mango TV, and the company has expanded its investment in films made for online streaming since 2018, according to Cao. “Its excellent production capability will earn it a piece of the pie in the online film market,” he said. Apart from producers and cinema chains, certain ticketing platforms are also likely to survive the trough in better shape. China’s semiconductor stocks show some immunity to coronavirus Maoyan Entertainment has low fixed costs and abundant cash reserves to maintain operation even in the face of months of little to no income, according to analysts at CICC, who maintained a “buy” rating of the company in report published earlier this month. The company operates on a light-asset and low-debt model, which better prepares it pull through the downturn. Despite these potential opportunities, investors should remain cautious about the sector as it’s still unclear when cinemas would be allowed to reopen, analysts say. “It’s difficult to tell when the industry will bottom out, and the shutdown may last for a pretty long period of time,” said Dai Ming, fund manager at Hengsheng Asset Management in Shanghai. “I wouldn’t say it’s a buy-on-dip opportunity as the outlook of the pandemic doesn’t look quite clear. I wouldn’t buy until things are clearer for me.” Additional reporting by Zhang Shidong