Goldman Sachs issued a report indicating that offline entertainment during the Spring Festival exhibited divergent trends, with high-quality live content being the core driver of entertainment consumption. Tourism spending grew by 19% year-on-year during this year’s Spring Festival, while box office revenues were lackluster, reaching only RMB 5.7 billion, a 40% decline year-on-year and returning to pre-pandemic levels. This phenomenon is attributed to the absence of high-quality releases this year, especially compared to the RMB 4.8 billion generated by ‘Ne Zha 2’ during the 2025 Spring Festival season.
At the individual stock level, amid recent corrections in share prices due to concerns over the disruptive impact of artificial intelligence and competitive pressures, the bank observed that some companies’ current valuations are nearing the lower end of their five-year price-to-earnings range. For instance, Tencent (00700.HK) is trading at 15x, NetEase (09999.HK) at 13x, and Kuaishou (01024.HK) at 10x, but earnings per share for 2026 are expected to achieve high single-digit to low double-digit year-on-year growth.
Looking ahead, the bank believes that in the gaming sector, Tencent and NetEase’s core classic games will maintain strong performance supported by enduring intellectual property advantages. Despite increasing supply of new games and overseas expansion emerging as a key growth driver, the impact of AI models on game publishing/operations remains limited. In terms of the competitive landscape for entertainment, Kuaishou/Bilibili (09626.HK) demonstrate solid business foundations with AI potential, whereas music and live streaming face more intense competition.
The bank has also revised downward its forecasts for Damai Entertainment (01060.HK) to reflect potential film losses and pressure on ticketing commission rates. However, IP-related merchandise is expected to sustain double-digit growth, with overall profitability steadily improving, potentially driving over 30% earnings per share growth in fiscal year 2027. The “Buy” rating is maintained, while the target price is lowered from HKD 1.17 to HKD 1.07.
Source: news.futunn.com
