Struggling Maoyan Gets a Boost In 2025 From 'Ne Zha 2'

The movie ticketing platform was dragged down by a 23% decline in China's box office last year, but held out hope for a stronger 2025

Key Takeaways:

• Maoyan said its profit fell by more than 80% in 2024 on a weak performance at China's box office
• The movie ticket seller has gotten off to a strong start this year as it benefits from the record box office for animated blockbuster ‘Ne Zha 2'

China's box office got a bounce post-pandemic from people eager to return to theaters, many of which were previously shut or operated on a limited basis to keep Covid-19 in check. But that bounce has faded lately as life returns to normal. A weak economy isn't helping matters either, causing China's box office to shrink by more than 20% last year as people reined in their spending on non-essential items like movie viewing.

The gloom cast a shadow over leading online movie ticketing platform Maoyan Entertainment (1896.HK) last year, causing its business to sag. Late last month, the company warned that its revenue last year fell around 14% to between 4.05 billion yuan ($560 million) and 4.15 billion yuan, as its profit plummeted around 80% to between 150 million yuan and 200 million yuan. Despite that gloom, it held out hope for better times this year on a strong performance for the Chinese box office over the recent Lunar New Year holiday.

Slumping box office

Maoyan attributed the profit decline mainly to the drop in China's box office last year. The number of moviegoers also fell 22.3% year-on-year to 1.01 billion viewings. The situation was especially grim in the second half of the year, when the box office plunged 35.1% year-on-year, sending a chill through Maoyan's core movie ticketing business.

As a movie investor, Maoyan also took a hit from poor performance for some of its productions, leading to a substantial decline in profits from its content services business.

One bright spot for the company was the live entertainment market, which managed to grow in 2024 to historic highs. But revenue related to that business is relatively small for Maoyan, with movie production and ticket sales much larger, leading to the company's sharp profit decline.

Despite the grim year, Maoyan was quite optimistic about 2025. It pointed out that China's national box office exceeded 22.2 billion yuan as of Feb. 26, with new records set during the important Chinese New Year holiday season. It said "Detective Chinatown 1900," for which it was the lead distributor and producer, was the second highest gross film during the period, taking in more than 3.3 billion yuan.

Furthermore, it said some of the other films it helped to produce or distribute, including "Endless Journey of Love," have been scheduled, while "The Litchee Road," "De Xian Jin Zhi," "The Dumpling Queen" and many others are steadily progressing for release at the right time.

Maoyan's bullish eye on this year owes largely to the strong Chinese New Year box office performance, which was mainly attributable to the blockbuster animated film "Ne Zha 2." Not only did the film become China's top-grossing movie, but it also entered the global box office top 10 and became the highest-grossing animated movie of all time. Its box office already exceeds 14 billion yuan, equivalent to one-third of the Chinese box office in 2024.

Serendipitous success

Maoyan commands a majority 60% China's online ticketing market, which means the company automatically benefits from a higher box office. But whether the box office can continue its strong year as "Ne Zha 2" inevitably fades remains an open question. It's hardly guaranteed that more blockbusters will emerge this year. Moreover, an element of serendipity in the unprecedented popularity of "Ne Zha 2" won't be easy to replicate.

On a broader time horizon, China's box office has gradually returned to normal in the post-pandemic era. It plunged during the pandemic, falling from 47 billion yuan in 2021 to just 30 billion yuan at the peak in 2022, before bouncing back to 55 billion yuan in 2023 with the end of restrictions. But then it slipped again to 42.5 billion yuan in 2024 as the rebound ran out of fuel. Generally speaking, the annual figure should normally fall between 40 billion yuan and 50 billion yuan, meaning Maoyan, as the largest online ticket seller, is unlikely to achieve any major breakthrough as long as it stays in that range.

Maoyan's other major revenue source, movie distribution and production, also depends on hit movies, which is beyond its control. In that regard it's certainly not alone, as even Hollywood has yet to figure out a guaranteed formula that can spell the difference between success and failure for a movie.

Viewing blues

China's sluggish economy is the most important factor in the current environment, making people naturally more cautious with their money. Even though movie tickets are relatively cheap, it's even cheaper to watch them online not long after their theatrical releases, and cautious consumers may be happy to wait to save some money. That bodes poorly for companies like Maoyan over the longer term, despite the strong start to 2025.

Maoyan's stock currently trades at a price-to-earnings (P/E) ratio of about 9 times. We can ignore comparisons to its major shareholder, "Ne Zha 2" creator Enlight Media (300251), whose ratio has skyrocketed to 140 times on the success of its huge hit. In fact, Maoyan's actual ratio is probably a bit higher than 9 times, based on its latest profit guidance, which would place it at 30 to 40 times. But such movie-related stocks may be shunned by long-term investors put off by their unpredictability.

"The one that shapes my destiny will always be myself rather than the God," the heroine in "Ne Zha" utters at one point in the movie. But piloting their own destinies may be difficult for movie-related companies like Maoyan, whose fate can hinge on just one or two successes or box office flops.