Author: Its real ALPHA
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T+0
Most Profitable
Time to unlock
Cathode Vision
India AI systems : Long term trend
Green Ammonia
Appliances Underowned : Long term trend
Protected: Positional Stocks 2-Dec-23
Bread and Bakery : Long term trend
CBG Blending for CNG PNG
Green Vessels
Its Salmon
Writing Instruments : Medium term trend
Medical Imaging AI : New trend
DIWALI To DIWALI PICKS – 2
FCL –Fineotex Chemicals
CMP 358, Market cap ~4000cr
ROCE ~36%, ROE ~28%, ROE 3Yr 25.5 %, D/E ~0
Consistent Dividend Payout, Consistent increase in revenues, Profits over a decade
Also Read : PICK1
Business, Revenues and SHP
➡️FINEOTEX group is one of the leading manufacturers of chemicals for textiles, construction, water treatment, fertilizer, leather, and paint industry. Fineotex manufactures and provides products for Pretreatment processes, Dyeing processes, Printing processes, and Finishing processes for textile processing to customers across the globe
➡️Company focus is on two categories –Textile chemicals and Clean & Hygiene chemicals
➡️Revenue 77% domestic, 23% International
➡️Bluesign, ZDHC, Star Export House Accreditations + several ISO certifications
➡️Fineotex Chemical Limited has earned the prestigious ECO PASSPORT by OEKO-TEX® certification, the highest rating in the globally renowned audit that measures standards of sustainability
➡️Received Dun and Bradstreet ESG Badge, it showcases the impact of ESG listing and ranking on organizations, and recognize their contribution towards sustainability
➡️Presence in more than 70 countries with 100 + dealers with 470+ product categories
➡️Consistent promoter holding, Good DII participation, Big Shark Ashish Kacholia holding 2.83% stake ( built his stake in last one year)
➡️Company has strong experienced leadership team and has reputed clientele
Strengths and Triggers
🟢Capex, expansion Done in last few years–Total capacity 104000MT, Ambernath plant is fungible and has the capabilities to manufacture products for both textile chemical and cleaning and hygiene segment.
🟢The facility is equipped with modern infrastructure and amenities, enabling sustainable chemical production with advanced automation, storage, and logistics handling
🟢Emerging/Expected Favorable tailwinds with UK FTA deal under discussion, Can open doors for Indian Textile segment and the company is proxy to textile sector
🟢Working capital days, Inventory days have come down significantly
🟢Malaysia plant has Easy access to high quality raw materials in the region. Malaysian plant provides raw materials to the Indian facilities. Cost benefits due to Free Trade Agreements (FTAs) with important regional markets like Vietnam, China and India
🟢Recent collaborations to expand product profile and geographical reach —
Eurodye-CTC, Belgium, to commercialize specialty chemicals for the Indian market
HealthGuard, Australia to become the exclusive global marketing and sales channel partner with joint operations from Malaysia
Setting up a state of art Research & Development center in collaboration with Sasmira Institute, one of India’s premier textile institutes
🟢Developed technical expertise to enter attractive new markets –like -Cleaning and Hygiene Chemicals Drilling Speciality Chemicals Other Speciality Chemicals
🟢Non-textile segments will drive volume and value growth going forward
🟢Team of 34 professionals for providing technical solutions to customers
🟢Technical barriers to entry and high levels of development and product customisation
🟢ICRA rating upgraded -Long Term Rating: A+ -Short Term Rating: A1+
🟢Successful acquisition and realisation of synergies with Biotex
RISKS
🔴Further Delay or non progress in UK FTA deal
🔴Textile exports remaining down or Reemergence with force by Bangladesh Textile companies
🔴Threat of imports of chemicals/dumping by China
Disclaimer — Not a buy/sell recommendation.
Purely for studying the stock idea with risks and strengths
Your Profit, Your Loss based on your conviction
Disclaimer
Protected: Premium Stocks : 26-Nov-23
Protected: Positional Stocks -26-Nov-23
H2biscus
PEM electrolyzer
Biofuel gensets
BPC market : Medium term trend
Real Estate Mogul!!
Zero based budgeting
Winner or runner up
No Aatmnirbharta in big cranes
Protected: Positional Stocks -19-Nov-23
Its all about training
AI computing chipsets
17 Qtrs ke baad
Its Scotch
Average freight train speed across India
Indian Jewellery market trends
We have 96 MASTERS
CV production India Trend
DIWALI PICKS – 1
PCBL –Philips carbon black
CMP 210, Market cap ~7900cr
Mcap/Sales < 1.5, ROCE ~17%, PE ~18.5
Business, Revenues and SHP
➡️India’s largest & world’s 7th largest Carbon Black Company with strong presence in specialty chemical
➡️Existing 4 plants combined Annual capacity of 623 KTPA & green power generation plant of 98 MW
➡️Focus on RnD in Speciality chemicals -50+ scientists & technical professionals in R&D and process technology
➡️70% revenue from domestic, 30% international
➡️65% revenue from Tyre segment –Major Tyre companies are doing capex–INR 35000 crs of investment by tyre industry in last 3 years in capacity creation & debottlenecking
➡️Presence in more than 50 countries with 100 grades of Carbon black, 65+ grades of speciality chemicals, 1100+ employees
➡️Consistent promoter holding, Good FII and DII participation
➡️Company has strong experienced leadership team + Company belongs to Renowned RPG group
Strengths and Triggers
🟢Capex, expansion ongoing -Green field project at Tamil Nadu with Annual capacity of 147 KTPA & green power generation plant of 24 MW, Specialty capacity in Mundra of 20 KTPA. Brownfield Expansion at Mundra plant, Gujarat. Total Specialty Chemical capacity after all expansions – 112 KT.
🟢Favorable tailwinds as vehicle scrappage policy, Growing demand for EV tyres, SUV tyres, Acceleration in freight movement
🟢Tyre exports witnessed healthy growth of 9% in FY23 driven by growth in passenger car , agri & construction sectors and increased acceptance for Indian tyres globally. Domestic Tyre demand is estimated to grow by 8-9 % in FY24 with growth recovery in OEM and replacement segments
🟢Tyre imports are reducing
🟢Easy access to raw materials and international customers with proximity to ports
🟢Lower logistics cost on account of well spread manufacturing facilities and proximity to customers
🟢Lower risk of business interruption with multiple manufacturing location spread across India
🟢Increasing Contribution from High Margin Specialty & Performance Chemicals Portfolio
🟢Company is also focusing on digitalization in its operations like INDUSTRY 4.0: Smart factory Solutions —
a) Smart Automation in new manufacturing unit in Chennai, Tamil Nadu to generate key analytics and dashboards, eliminate human error and improve safety.
b) Adoption and deployment of best-in-class Data Security softwares and Advanced threat protection for all end users.
c) Creating Digital Infrastructure by set up of disaster recovery data centre for critical data protection, Automated tool-based backup is scheduled and monitored for all critical Cloud Servers.
RISKS
🔴Key Raw material CBFS is imported and dependent on crude oil price
🔴Major portion of PCBL’s revenue is from sale of CB to tyre manufacturers which is cyclical business
🔴Threat of imports of carbon black or Dumping by China
Disclaimer — Not a buy/sell recommendation.
Purely for studying the stock idea with risks and strengths
Your Profit, Your Loss based on your conviction
Update in 28-Nov-23, 29-nov-23
Acquisition of ACPL at 3800cr, EBITDA of ACPL is 417Cr in FY23
JV with Kinaltek for battery applications
Happy Diwali greetings to all of you
Starting 12th Nov23
1 stock with future potential coming every alternate week (total 25 stocks till next Diwali) only on http://alpha-affairs.com
Though stocks have been chosen with certain basic criteria, but there is no guarantee of success in markets.
All 25 can fail, all 25 can become multibaggers—it depends upon Entry point, conviction to hold, timeframe, business potential, macro factors that impact business
I am just sharing what I found useful for myself
One can safely assume that I have a vested interest in stocks I share on my timeline
Hence, no queries will be entertained on buy, hold or sell, You need to Develop your own conviction
I will not be responsible for your losses or your profits None of the posts related to stocks picks should be construed as buying recommendation from my side
Annual Highway Construction trend
EV buses under China control
Cost of energy
Lock in expiry
South’s Choice : Plain Vanilla
Survivorship bias
rPET : Mega trend
IPO : India Stock Market
Power Demand YoY
OTT : Huge growth Opportunity
RCB
Plastics Moulding Industry
Chart of the month: Brent
Mega Trend : Global Travel and Tourism
Best-Inventions-2023
Income Tax filers : Mega Trend
Alpha Learners Day 28th Oct23 : Join Immediately
We will be having ALPHA LEARNERS DAY this 28th oct Saturday
Its an event designed to increase domain knowledge from different sectors and hence companies are chosen from different sectors segments
Timing is from 10:15 to 5:30pm with relevant lunch and tea breaks in between
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Around 10 companies with thesis will be presented–We are planning to record as well
How these meets/events can be useful —One may get a lead to deep dive more into the stock presented or relevant sector
One of my latest entry SKYGOLD which is the fastest doubler came out of one such meet
Remember
Any stock shared or discussed is NOT A BUY/SELL recommendation, Treat it as a lead to increase domain knowledge
Any losses /gains arising out of that –nobody is responsible from presenter/organizer side —we are clear that we are not recommending any stock
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One lucky draw each in morning session and evening session
There is a Best presentation award for participants based on audience polling
EPIC value chain
Belt treatment
Reclaim rubber : Tyre Sector : Long term trend
Loans on paytm
Protected: Positional Stocks -22-Oct-23
Mega TREND : Great Indian Wedding
Spending is going to go up in coming years–As we see that from past trend
one can find stocks related to the theme
Padoge likhoge hoge bekaar??
Very very disturbing trend!!
People dont have skills
OR
People dont want to work
OR
Automation taking away their jobs
Or
What ELSE
Protected: Premium Stocks : 20-Oct-23
High Price segment in power trading
Compliance and Consultancy Market Opportunity
Freight Corridor
Demat accounts : Mega trend
Structural tubes : Long term trend
Protected: Positional Stocks – 14-Oct-23
MNC not able to tame Indian Markets
Right first time? Unlikely
Acquisition and Targeting
India’s Space race
ALPHA SUNRISE Portfolio precisely captures this theme along with Recycling, Defense, EMS
If you want to be part of my journey of portfolio creation in emerging sunrise sectors then just drop a mail to alphaaffairsf2f@gmail.com and at a nominal yearly amount get to know ALPHA SUNRISE Entry and exits
Shuddh Videshi Romance : 100% imports
Demographic dividend
Differentials makes a difference
OSW markets
Crash in another world of lithium
Protected: Positional Stocks – 7-Oct-23
Only 2 questions
Panchamrit
China CV sales
Image sensor CAGR in last few years
Break in narrative
Footwear Market : India
Junk galore
ALPHA LEARNERS – Mentorship program Oct-23
With great pleasure and best wishes from all of you, we are delighted to launch new batch of
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WEEE Recycling : Need of the hour
Protected: Positional Stocks – 2-Oct-23
Hopes on Ayodhya
Time for offshore
Vibecession
Military spending
Li-ion : India demand
E-Waste Accumulation
Hydrogen Fuel cell Powered Buses
Protected: Designs make it worth
Merry Time
Lets Dive into our next research Idea
Marine Electricals
Read Pick1, Pick2, Pick3, Pick4, Pick5, Pick6, Pick7, Pick8, Pick9, Pick10, Pick11, Pick12, Pick13, Pick14, Pick15, Pick16
I also talked about the same company in my YT channel in ALPHA LEARNER DAY 28Oct 23
About the Company and Business —
Marine Electricals is an integrated technical services provider in the fields of electrical automation and information and communication technology solutions.
Marine Electricals offers integrated and multidisciplinary total solutions that lead to better business processes and more efficiency for customers and the customers they, in their turn, serve.
Established in 1978, Marine Electricals serves the market for about 34 years in diversified areas like Ship Building / Navy / Industries / Commercial Establishments. We are one of the largest supplier of Electrical & Automation Equipment for Marine Applications in India and Middle East Markets
In electrical engineering Marine Electricals covers the entire range of electrical engineering solutions of every size, such as low and medium voltage, energy distribution, measuring and control technology, instrumentation, infrastructure technology, electrical propulsion, integrated security, building management, access technology, system technology, and power electronics.
Buildings: All types of buildings including data centres, distribution centres, offices, government buildings, high rise building, laboratories, airports, penal institutions, leisure centres, stadiums, stations, universities and colleges, shopping centres, hospitals and care institutions.
Industry: A focus on power plants, the automotive industry, pharmaceuticals, chemicals and petrochemicals, the energy and environment market, pharmaceuticals, machine building, oil & gas, and the aircraft industry.
Marine: Naval vessels (logistic support ships, frigates, corvettes, patrol vessels and submarines), special ships (dredgers, offshore support ships, diving support vessels, crane ships) offshore platforms, cargo vessels (container ships, bulk carriers and other cargo ships), passenger liners and inland waterways vessels.
Company provide innovative state-of-the-art system solutions and products designed to meet the most exacting requirements for ships of all types and sizes through the entire life cycle. These range from coastal and inland shipping vessels, ocean-going passenger vessels, bulk carriers, tankers, container vessels, luxury yachts, tankers to specialist offshore, environmental and research ships as well as naval vessels.
One of the few companies in the world capable of supplying from a single in-house source the following:
- Electrical Power Packages
- Electrical Drive Systems
- Automation Systems
- Maritime Services
- Navigation and Communication Equipment
Employee –1000+
Manufacturing plants -6 across Goa, Mumbai, Chennai and UAE & Italy
Service centers – 14 Service Centers across Coastal locations in India ensures shorter Service Time for Clients
Subsidiary and Group companies
Evigo Charge Pvt. Ltd a subsidiary of Marine Electricals India Limited established in 2018, is an e- mobility venture, operating across the country and is visible through its brand Bijlify®. The company is one of the vertically integrated companies in the EV charging space, with its core activity being Design, manufacture and supply of various types of Electric Vehicle Chargers and powering up sustainable mobility through its mobile application under the Bijlify Brand. The company offers the complete eco-system including software, hardware and service for the same. The software set comprises of a next generation CPMS Terminal that is scalable and can be customized based on needs of our customers. The hardware boasts of AC and DC types of fast chargers that can accommodate the needs of most electric vehicles. All of these are designed in-house and completely tailored to offer maximum convenience to the end-user and manufactured in state-of-the-art facilities in Goa of Marine Electricals India Ltd.
STI is a group company of Marine Electricals, which is recognized as ‘Global Expert’ when it comes to renewable energy, energy efficiency and energy management.
Based in Italy, STI has its own production facility to design and engineer suitable renewable energy solutions as per the clients’ requirements.
As a leading EPC (Engineering, Procurement and Construction) company, STI provides outstanding design and engineering services, onsite project management, execution, installation, testing and commissioning as well as maintenance services across the world.
Different Segments (Industrial, Data centers, Marine, Solar, EV chargers)
Electric power generation, management and distribution is becoming increasingly important on modern day vessels. Marine Electricals can offer the entire power systems starting from the generators right up the lighting distribution panels and sockets thus offering a complete system responsibility, using the latest engineering tools Marine Electricals is able to ensure that individual components forming part of the complete system comply with the requirements( short circuit levels, discrimination, cascading, harmonic distortion, failure mode effect analysis, vibration etc.)
Marine Electricals provides solar power solutions to the industrial, institutional and commercial sectors. Right from design, engineering to project development and maintenance, we provide a comprehensive range of services to the clients looking for a reliable and environmental friendly source of electricity.
Strength, Triggers, Order books, opportunities
Strong Management team with extensive experience
CDR RAJEEV MALHOTRA
Chief Operating Officer Cdr. Rajeev Malhotra has worked in the Electrical department of Indian Navy from 1984 to Mar 2006 in various capacities at varied units of the Indian Navy, which included serving onboard warships, Warship Design directorates, Naval dockyards and ship repair yards, Quality assurance departments of MoD and Head Quarters . Thereafter joined Marine Electricals in Apr 2006 as a General Manager, Marine division. Besides steering the Planning, production, inspection and after sale service of varied customized Electrical Panels, he expanded the scope of offerings to providing solutions for Navigation & Communication for both Defense and Commercial Marine by creating required partnerships with leading manufacturers of these specialized systems, thereby providing a complete turn-key solution for new ship build programs of Defense and Commercial Marine.
CDR SHAMMI PUJJI
GM – R&D and Product Development Cdr. Shammi Pujji is management graduate engineer with more than 40 years of rich professional experience in Defence, Marine & Telecom. He heads the R & D division in addition to providing management support in business solutions. Before joining Marine Electronics family, he was Managing Director & owner of Oriole Technical Solutions Pvt Ltd ‘OTS’ specializing in indigenous solutions like WSDS (Wind Speed & Direction System), AFAS (Addressable Flood Alarm System), Ops Room Trainer (simulator for Navigation Training School, Navy), Missile & Sonar Recording Systems, and a host of software & embedded software solutions for Indian Navy. OTS is now one of the group companies of Marine Electricals.
Mr. Shammi started his career in Jan 1975 with Indian Navy as a commissioned Officer. In his 20 years of naval service, he received commendations from Chief of Naval Staff & Flag Officer Commanding-in-Chief for his out of box & innovations solutions complementing meritorious service rendered to the nation. After taking premature retirement in 1995, he served with a number of professional organizations.
As a topper in B.E. (Elec & Telecom), he pursued MBA with IGNOU, and he is a certified Lead Assessor for ISO 9001:1994 QMS. Apart from the commendations in Indian Navy, he received Bronze Medal at National Defence Academy as well.
MR. SRIRAM KRISHNAMURTHI
Solar Business Consultant Sriram Krishnamurthi has been working in Electrical and renewable industry for over 30 years. He has a PGDMM degree, and has vast experience in strategic planning, profit centre operations, business development, key account management, project management, techno commercial functions, and management in the electrical and renewable space. Adaptation to any new business and delivering results with effective peer management is one of his core competencies. He is also an expert in managing sales and distribution of B2B and B2C products, key accounts management, and effective policy management on a strategic and operation levels.
Milind Dalvi, CTO (Chief Technology Officer)
30+ years of experience into Medium Voltage and Low Voltage Switchgear Design, Instrumental in R&D, testing of equipment with certifying laboratories like ASTA, KEMA, ASEFA and CPRI. Previously worked with companies like Schneider Electric & Crompton Greaves
Esteemed clientele with strong relationships
Order book size
From Dec22 to Sep23
Current order book position standing at Rs. 482cr approximately at end of FY 2022- 2023. Considering below orders from Mar23 onwards minus the Q1Fy24–Order book looks to be around 482+102-101= ~482 Cr at 24Sep23. Few more orders came after that —so around 500cr order book is expected
From Sep23 to Jun24
To Expand Capabilities in
- IPMS for Navy
- Complete Installation Package for Naval
- Service Contract for Weapon System
Defense Tailwinds + Shipping ecosystem emerging + Increasing order book of Shipyards
Exploring new opportunities in Metro, Railways, Ports, EV Charging
Expanding Solution Offerings in Marine
- Providing IPMS for commercial ships, working on expanding it to Naval Ships
- Focusing on complete installation package for Naval Ships
- Targeting to receive Service Contract for Weapon Systems Geographical Expansion in Industrials
Geographical expansion in Industrial segment
- Entering South India with acquisition of Eltech Engineers
- Exploring acquisition opportunities to enter North & Eastern India
Evigo charge, a subsidiary, is eyeing a rapid expansion in the next couple of years. It is aiming to contribute to the country’s fascinating growth story by taking this charging ecosystem to the last mile. Over the next two fiscals it is eyeing a double digit growth.
EVIGO offers featurerich EV charging software solution
- Manage EV charging network via OCPP, handle management of charging station, partnership relations, tariffs, billing & payments, CRM & Statistics
- Provide convenient way to access charging stations through a mobile app
Certifications and Awards
Quality Management System, compliant with the international ISO 9001:2015, ISO 14001:2015 & OHSAS 18001:2007 Quality Management Standard, is certified by Indian Registrar of Quality Systems.
Financials
Time when I started buying Marine electricals
Improving sales , Stable OPM, Improving Cash conversion and Working capital cycle, Improving ROCE
Valuations
Looking reasonable considering the tailwinds in Navy and Ship building sector and upcoming Metros, Data center and EV charger industries
Technical Chart
Technical chart on 29-jun-24
Technical chart on 23Sep23 and Oct23
RISKS
Ongoing NCLT case — MEIL has purchased the property by making payment of sale consideration of Rs. 11.60 crore and stamp duty & registration fees of Rs. 1.11 crore towards registration of Sale certificate (ciemme jewels ltd liquidation)
Electrical business has high competition though their strong relationship should sail them through.
EV chargers business- Need to track this business carefully on how the margins, orders turn up in near future.
Solar panels business could be deworsification.
There is a GST notice which came in oct23 –which is also explained by company –that they have paid the GST earlier and its a mistake from Tax dept for the state in which they accounted it.
Update on NCLT case –Notification 4th oct23
Case is dismissed, Company expecting 11.6cr refund and it will be used for company own purposes, no acquistions planned in near future
Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It can be used for educational purposes. There can be lot of things which have been missed in analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.
In case you have any questions/ queries, please feel free to reach me through Contact Form
Do spread the word among your peers, family members or anyone who can benefit from this blog and asked them to subscribe. But be selfish and take care of yourself first by subscribing before they do.
Enjoy the day and your life. Don’t forget, we are alone in this grand universe and may not get a chance to live again.
Global Carbon credit market
LOHUM : Nepal connection
Moving ahead : Phantom FX
The visual effects of these films were done by an Indian company that has made these movies a thorough visual delight and provided millions worldwide with pulsating entertainment and ever-lasting memories.
Yes, We are talking about our next research IDEA
Phantom Digital Effect Limited (Phantom FX)
A Company that works passionately and diligently behind the Scene for hundreds of movies and documentaries to Bring Your Imagination Alive on screen
WHAT IS VFX?
Visual effects (VFX) refer to special effects that deeply reflect the story’s visual representation
VFX has evolved to deliver sights that cannot be filmed. This procedure involves the incorporation of live-action footage as well as the imagery created to create realistic scenes. It is expensive and requires considerable investment, which involves creating a large creative workforce, big state-of-the art studios and electronic instruments. Additionally, it needs an uninterrupted power supply and good cooling capabilities
Fun Fact
10% EVERY MOVIE IN ANY GENRE ACCOUNTS FOR 10% OF VFX USAGE
90% of all movies have some form of VFX involved
Before we move further , lets see what they do through a reel
About the Company and Business —
Incorporated in 2016, Phantom Digital Effect limited is a creative VFX studio that excels in creating jaw-dropping visual effects for leading movie/ documentary makers worldwide and in India. Company contribute to the production, pre and post production of feature films, web series and commercials. Besides working directly on a particular project, they take up subcontracts for large VFX studios.
PhantomFX specializes in various VFX services
- Completing a Shot with Final Compositing
- Creating 3D Elements, Photoreal creatures, and Environments
- Rig/Wire Removal, Paint cleanup, Rotoscopy
- 3D MatchMove
- 3D Animation (Story Board, Animation)
- Pre-visualisation
- Game Cinematics
- Fire/Water Fx and other natural phenomena
- 3D Ride films animation
Some stats
Geographical presence –Company has three state-of-the-art studios in Chennai, Mumbai and Hyderabad, India
And has marketing teams at Los Angeles, Vancouver and Montreal
Clients –500+
Employees/ Artists -500+
Office space 39000 Sq ft
Repeat clientele ~46%
Clients associated for more than 5 yrs –25%
International business vs Domestic business 40:60
Strength
Promoters have significant industry experience and have been instrumental in the Company’s consistent growth
Esteemed clientele with strong relationships
Good work done in past to showcase and bring new clients
Triggers
Phantom FX has recently acquired a new studio cum office space in Mumbai, Hyderabad and Chennai with the capacity to accommodate ~150, ~60 & ~50 employees, respectively.
Phantom FX plans to open office cum studio space in London and Dubai shortly
Latest update in 21Sep23
Planning to hire 2,000 more employees in the next two years.
Targeting significant contribution from the OTT sector and expects at least 50% of revenue from international operations.
The global VFX market is expected to grow from US$28.81 BILLION (2022) to US$65.45 BILLION (2030) AT 10.8% (CAGR)
According to an Indian I&B Ministry estimate, between 2023 AND 2024 the domestic VFX space is expected to GROW AT 30% (CAGR)
Increasing use of digital video streaming platforms and high-quality content has positioned VFX as an integral part of the OTT evolution
Expansion of OTT services: The proliferation of smart devices like smartphones, HDTVs, laptops, tablets and subscription-based video streaming services in both advanced and emerging economies are driving the growth in the VFX industry
Owing to the rapidly growing demand for OTT content driven by low data charges in mobile broadband, the Asia-Pacific region is expected to witness the fastest market growth till 2030. India and China are likely to surpass the continent over the medium term
Demand for highly realistic and super-quality content: Worldwide demand for high quality realistic content is driving the demand for the market. VFX alters, creates, replaces and enhances live-action media to include effects that are otherwise impossible to capture
To promote the animation, visual effects, gaming and comic sector in India, the I&B Ministry of India formed a task force likely to create nearly 2 million jobs in India. AVGC XR (Animation, Visual Effects, Gaming, Comics, and Extended Reality) Promotion Task Force recently submitted their plan with several recommendations to the Government.
Plans to foray into animation services space and tap allied field of gaming which requires extensive VFX by leveraging its capabilities and experience.
VFX Tailwinds emerging
VFX grew 30% to reach INR50 billion in 2022
- From delivering back-end services only, India has now emerged as the provider of turnkey services – from pre-visualization to final rendering. This also means an increase in both value and volume of work coming India’s way
- Indian creators investing in Advanced VFX and virtual production companies
- Domestic players expanding their base
- Tentpole movies like Avatar etc have always been heavy on VFX, and continue to be a major draw for audience across theaters as well as on OTT platforms globally
- The major draw in OTT today is episodic content across platforms. This content draws heavily on VFX and is the second-largest addressable market today
- There has been a 100% increase in high-budget films (INR100 crore or more) in India in 2022 over 2021, which increased the demand for domestic VFX services
- Large budget films tend to spend 25% to 30% of the entire budget on VFX. The corresponding number for a low to mid-size film is 10% to 15%
- Top global VFX players are turning to India to leverage the cost arbitrage that India continues to offer as sequels are generating a lower return in many cases. This will further increase the revenue from service exports
- Studios are embracing technologies like virtual production, machine learning and artificial intelligence. This is helping streamline the workflow with quicker iterations, thus improving efficiencies further
- Availability of capital for infrastructure and technology, and skilled talent are the two major challenges for growth in the segment
Top global VFX players expanded into India to leverage the cost arbitrage that India continues to offer
► For a global VFX player having operations in India, Indian VFX artists cost only one-eighth of the cost incurred on hiring artists in the UK or North America16
► In the last two years alone, the Indian visual effects industry has created 60,000 jobs, with studios like MPC in Bengaluru going for an extensive hiring spree
► In 2022, five global VFX players, including ILM, have either started operations or announced their entry into the Indian market
New subsidiaries, Offices, Capex plans, Orders, QIP
The company has recently been awarded a prestigious contracts worth Rs. 62.5 Mn which includes a significant deal valued at Rs. 40 Mn, in the field of international movie production.
Company has received work order from Netflix (Netflix Worldwide Entertainment, Netflix US and Netflix India Originals). VFX for Project includes Netflix-branded audio-visual content, whether produced directly by Netflix or licensed from a Licensor for exhibition on Netflix OTT. Time period of the order is 4 years with extension option for another 2 years. Estimated order is INR 120 Cr over 4 years.
Total order book from May23 onwards is 200cr approximately (100cr is estimated execution order for FY24)
Added 50cr more in Jan24 in order book from KJR studios after recent success of movie Ayalaan
Jun ‘23: BoD has approved the incorporation of a wholly owned subsidiary of the Company in London, UK. This will leverage the growth opportunities in the international market and avail the maximum benefit of the resources available. The business of subsidiary is in line with the main object of business of the Company.
Dec ‘22: Company has been endorsed as an Amazon-approved VFX studio. The same is notified to all Amazon productions. Due to this development, it will be able to provide various VFX services for Amazon’s production.
It has also been qualified for the Walt Disney Vendor Evaluation Program. It is authorized to receive content from Walt Disney Studios and/ or Television groups. There will be an increase in the total number of OTT Projects with the active participation by Amazon and Walt Disney for the same.
DNEG, one of the world’s leading visual effects and animation studios for feature film and television, has approved the Company as an Outsourcing Vendor to handle various assignments pertaining to their feature film, television, and multiplatform content. This association with DNEG will further boost Company’s order book and further enhance the quantum of projects.
Dec ‘22: Company announced its opening of a third office with the ability to accommodate 50 employees in Chennai.
Nov’22: Company is on the verge of completion of establishment of a new studio cum office in Bandra, Mumbai. Once operational, it will be able to accommodate 250 employees and will be equipped with infrastructural facilities for VFX studio to expand the services of the Company.
Openings recently in the company
QIP of 80cr done with renowned fund houses at 412Rs/share. What caught my eye is expansion in Gaming and Animation space
Success of Movie Ayalaan
15Feb 24 update on process of acquiring a company
Certifications and Awards
Phantom FX is TPN Certified, among the few in India with this coveted watermark.
This certification means that we are a ‘data-secure ecosystem’ that meets the rigorous standards of the MPAA.
- Excellence In Animation and Visual Effects In Times Business Awards 2022
- Company of the Year In Outlook Business ICON Awards 2023.
- VAM Awards 2022 for Best VFX Shot Award for the Movie, Dangerous
- VAM Awards 2023 – Best Simulation Effects for the Movie, Beast
- VAM Awards 2023 – “Best use of Previsualization” for the movie Beas
Financials
Management Guidance
Revenue is expected to grow by ~75-80% in FY24 led by inflow of demand for our services and effective execution of order book.
EBITDA margins is expected to stay within a corridor of 33-35%
Jun23 results shows management walking the talk
Skin in game along with FII and DII increasing stake
Valuations
Management guides 100cr revenue approximately leading to bottom line of approx. 22-27Cr
Estimated EPS 20-23, PE range 20-50 leading to price range of 400-1050
That means we are very close to low valuations
Technicals
on 27th Oct23
Interesting Pattern on 5dec23
Support demand zone seems to be respected in recent downturn
RISKS
Increasing assets and employees, if not ably supported by orders, can turn out to be a problem
Increase in trade receivables as business grows is an issue which needs to be monitored very closely
Just 1-2 bad reviews, bad work can lead to downfall of company faster than we can imagine. In simple words, clients will come because of work quality
Valuations –Company though looks undervalued considering the growth potential, but if growth stalls or new orders don’t come at an anticipated pace, then these valuations may turn out to be a trap
Heavy Dependence on Exports–Company and industry in general is dependent on International assignments. Recent strike by artists in Hollywood crippled the revenue in second quarter of H1FY24
Risk of talent poaching— The attrition rate in the VFX segment in 2022 was 25% to 30%. High poaching of mid-level talent was also observed in the segment. Almost all industry leaders were concerned about the inability to find technically skilled employees to meet the opportunities provided by the high global and domestic demand for content –Companies are working in it by implementing training programs to acquire, retain and up-skill talent
Competition: The high-margin business and its growing opportunities is attracting a number of players into this field which is increasing the competitive intensity.
Technology: VFX studios require cutting-edge technology and software to produce high quality visual effects, which can be expensive to acquire and maintain. Additionally, keeping up with the latest technological advancements can be a challenging task.
AI tools are posing a threat where with use of AI tools, movie can be created without much effort and labor. We see this as an accomplice for the company where such tools help to add value along with human creativity, Read few such article on AI impact and usage in VFX
Timeline issues: The VFX industry faces is the increasing demand for visual effects combined with tight project timelines. As clients demand high-quality visual effects in less time, VFX studios often have to work overtime to deliver the final product on time. This can lead to employee burnout and a decline in the quality of work produced, ultimately impacting the reputation of the studio
Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It can be used for educational purposes. There can be lot of things which have been missed in analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.
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