Key Takeaways:
Shares of Damai Entertainment (01060.HK) surged over 6% in Hong Kong after box office projections for its low-budget film ‘Dear You’ soared past RMB 1 billion, signaling a massive return on investment for the producer and distributor.
"The film's projected total box office has been largely revised up from RMB210 million on May 7 to RMB1.1 billion on May 15," a Citi report said, which maintained a 'Buy' rating on the stock.
The stock opened 6.06% higher on May 18, hitting a peak of HKD 0.79 before easing to HKD 0.63 on turnover of HKD 968 million. The film, produced on a shoestring budget of just RMB 14 million, has seen its box office forecast increase by nearly 425% in just over a week, according to Maoyan estimates cited by Citi. This performance stands out in a crowded market that includes global hits like 'Michael', which has grossed over $700 million worldwide.
The unexpected blockbuster success of ‘Dear You’ is poised to deliver a substantial windfall for Damai Entertainment, with investors keenly watching for the impact on the company's financials. The result provides a significant boost ahead of Damai's full-year earnings announcement, scheduled for May 27, and validates the company's production strategy.
Released on April 30, 'Dear You' gained momentum through positive audience feedback, bucking initial expectations. Its success as a low-cost production contrasts with the performance of other major titles in the market. For instance, the Tamil film 'Karuppu' grossed approximately ₹66 crore (about RMB 67 million) in its first two days, while the biopic 'Michael' continues to be a major force, earning $83.8 million globally in its fourth week of release.
Citi analysts kept their price target at HKD 1, implying significant further upside from its current levels. The bank acknowledged that while the company is investing in multiple new initiatives, the success of 'Dear You' provides a clear demonstration of its potential to generate outsized returns.
The surge in Damai Entertainment’s stock reflects investor optimism that the film's profits will significantly impact the company's bottom line. The focus now shifts to the upcoming earnings report on May 27, where management will likely provide more details on the film's contribution and the company's future content pipeline.
This article is for informational purposes only and does not constitute investment advice.
