Competition in the industry is fierce and investment risks are increasing. The transformation of Kimi Pictures cannot be rushed.

the upstream transition requires not only more professionals, but also experience, which cannot be achieved in a short period of time.

Jimei Pictures, known as the "first film and television stock on the new third board", has not been having a good time recently. On June 14, Jimei Pictures officially resumed trading and resumed stock transfer, but its share price plummeted all the way, falling as low as 2 yuan per share and falling as much as 55.65%, which is closely related to the sharp decline in performance in the past two years and turning from profit to loss. Jimei Pictures, which cooperates with many overseas film companies and earns a lot of income by helping to buy out imported films such as "Super body," has been expanding its business from downstream to the upper reaches of the film industry chain in recent years, but the actual effect is not satisfactory. instead, it's a drag on the company's performance.

< strong > profits have declined for two consecutive years < / strong >

due to the failure to disclose the annual report on time, the transfer of shares of Jimei Pictures in the national share transfer system for small and medium-sized enterprises was suspended in May, and the transfer was not resumed until June 14. However, after the resumption of trading, the share price of Jimei Pictures plummeted, closing at 2.97 yuan per share, down as much as 34.15%, and the market capitalization quickly shrunk to 884 million yuan. At its peak, the share price of Jimei Pictures reached 51.41 yuan per share, and its market capitalization was as high as 3.861 billion yuan, which is in sharp contrast to the situation of Jimei Pictures at this stage. In the following days, the share price of Chi Mei Pictures continued to move up and down, closing at 3.46 yuan on June 16.

through observation, it can be found that the collapse in the share price of Jimei Pictures is closely related to its performance in the past two years. According to the data, after the net profit belonging to the shareholders of the listed company increased by 556.71% in 2014, the performance of Jimei Pictures did not increase significantly in the next two years, but declined rapidly and turned from profit to loss. Among them, in 2015, the net profit of Jimei Pictures, which belongs to the shareholders of listed companies, decreased by 31.55% compared with the same period last year, while in 2016, the net profit of Jimei Pictures dropped sharply by 830.14% compared with the same period last year, and changed its profit from 36.3363 million yuan in 2015 to a loss of 265 million yuan.

with regard to the sharp decline in performance in 2016, Jimei Pictures said that in 2016, the company dominated the script development, investment production, publicity and distribution of the three films "Magic Wheel", "Warrior Gate" and "Super Express". The input cost increased significantly compared with the previous year. At the same time, the growth trend of the domestic film industry is slowing, and the growth rate is lower than market expectations. the box office of the above films fell short of expectations, and domestic box office receipts declined compared with the same period last year, which was the main reason for the losses in 2016.

< strong > expanding the upstream market is not as expected < / strong >

mentioning the development of Jimei Pictures in recent years, we have to mention the company's business model. Since its establishment in 2008, Jimei Pictures has cooperated with a number of overseas film companies to help promote buy-out films, cut into the field of imported film distribution, and achieved corresponding revenue, especially the success of "Super body" and "violent neighborhoods". Let Jimei Pictures form a certain reputation in the industry. However, Jimei Pictures did not stay at the level of assisting in promotion, but decided to carry out strategic transformation, expand its business from downstream to the upper reaches of the film industry chain, and act as the executive producer to control the investment, production and shooting of films. the focus of business has been adjusted to script development, film finance, film production and other areas.

however, the transformation of Jimei Pictures has not been smooth. Take the three films dominated by Jimei Pictures in 2016 as an example, the highest box office was "Super Express", but the box office was only 61.637 million yuan, followed by "Gate of the Warriors" with 22.838 million yuan, and the worst one was "Magic Wheel", which grossed less than 10 million yuan, only 7.835 million yuan. As the box office fell short of expectations, the performance of Chi Mei Pictures also declined. At the same time, the operating cash flow of Jimei Pictures is also in a state of outflow. From 2013 to 2016, the net cash flow generated by the operating activities of Jimei Pictures was-24.9533 million yuan,-10.9751 million yuan,-196 million yuan and-162 million yuan respectively.

Jimei Pictures said, "previously, the company and investors realized that the future promotion business would face fierce competition and low moat, so the company began to invest in some films one after another in 2014. Transition from the lower reaches of the industrial chain to the upstream. At present, the company's short-term performance is declining, which is a normal process of strategic transformation. Xu Shan, an investment analyst, believes that although they are all links in the film industry chain, there are great differences between distribution and investment production in the specific operation process. One is more focused on marketing, while the other needs to have an accurate grasp of content creation and market demand. The professionalism required is not the same. At the same time, the risk of investment production is higher, and it is not easy to achieve transformation.

< strong > the transformation should not be done in haste < / strong >

the high risk of the film industry has been recognized both inside and outside the industry, and "ten votes and nine losses" is no longer a secret in the industry. And according to public data, 3742 films were established in China in 2016, but only 772 feature films and 49 animated films were actually completed, with a total of 821 films licensed. In addition, the total box office of domestic films in 2016 was 26.663 billion yuan. On average, the box office of each domestic film is only 30 million yuan, and only about 50 films have actually grossed more than 100 million yuan, and many films have not been released. According to Wang Bing, chairman of Fengshan Culture Communication Co., Ltd., only 5% of the hundreds of films a year make a profit, 5% get a return on capital, and the rest lose money.

in addition, it can be found that at the present stage, the domestic film market has entered a period of adjustment. In the first quarter of this year, the domestic box office dropped by 1.7% compared with the same period last year, while the number of moviegoers showed a negative growth for the first time, down 3.6% from the same period last year. The audience's demand for film quality continues to improve. With regard to the current situation, Jimei Pictures is also trying to improve its ability in some ways, not only in cooperation with some well-known foreign film companies, but also through its subsidiary FF Motion in 2016 to participate in the private placement of EuropaCorp with about 60 million euros, becoming the second largest shareholder of the latter.

practitioners believe that the increased risk of the industry will undoubtedly bring greater challenges to the upstream transformation of Jimei Pictures. Xu Shan believes that there is no right or wrong in the upstream transformation of Jimei Pictures, and the key lies in how to complete the transformation. for Jimei Pictures, which previously focused on helping to promote its business, the upstream transformation not only requires more professionals, but also requires experience accumulation, which can not be achieved in a short period of time. In addition, Jimei Pictures should not act too hastily in leading the main film project. Can first participate in investment, joint production of the way to master enough experience, and then control the project.

Edit: jessica