Will Phantom Digital turn around its stock price playing VFX

Mr. Bejoy Arputharaj from Phantom Digital Effects Limited (PhantomFX) wins the prestigious title of ‘Business Icon Award – 2022’ in the category Company of the year

 Outlook Business Spotlight’s Business Icons Awards 2022

Stock data

Ticker	PHANTOMFX
Exchange	BSE and NSE
Industry	Entertainment

Price Performance:

Last 5 days	+12.18%
YTD	+132%
Last 1 year	+51.93%

Company description:

Incorporated in 2016, Phantom Digital Effects Limited is a Certified Trusted Partner Network (TPN) company, a full-fledged creative VFX studio, based in India with offices operating in US and Canada. As a TPN Certified studio, PhantomFX offers a wide range of VFX services.

Certified Digital company:

Phantom Digital Effects provide high-end visual effects solutions for commercials, feature films, and Web series globally. The company has two studios located in Mumbai and Chennai. 

Phantom Digital Effects Ltd (PDEL) is a Certified Trusted Partner Network (TPN) company, a full-fledged creative VFX studio, based in India operating in US and Canada through agencies. The Company does not have any offices in the US or Canada.

Diverse Offerings:

It provides high-end visual effects solutions for commercials, feature films, and Web series globally. PDEL offers all sorts of creative VFX works, ranging from Final Compositing and Roto to creating 3D Elements, Photo real creatures and Environments, 3D, match move, and Animations.

Specialization:

 The Company is a creative VFX studio, specializing in Film, Web series, and Commercials. It has delivered thousands of shots for Domestic and International feature films (Hollywood), Web Series & commercials in the past few years. Apart from working for film production and commercials, PDEL periodically takes up subcontracts from larger visual effects studios as well.

Completed Projects:

Some of the recent Indian Projects & International Projects that PDEL has executed successfully and are well-recognized by the industry and well-appreciated by the viewer are – Vikram, RRR, Beast, Robot 2.0, Minnal Murali, Bahubali 1 and 2, Puli (South), Avengers, Superman and Lois, Transformers, etc. As of June 30, 2022, it had 306 employees on its payroll.

Clientele:

The Company has worked with a large number of marque clients which includes KJR Studios, DRP-Gunaa Teamworks, Zoic INC, RaajKamal Film International, Retrophiles Private Limited, MatchBox Shots LLP, VFX Cloud, Sun TV Network, 24 AM Studios, Eros International Media Ltd, The Vermillion World, Konidela Production Company and Slingshot Creations.

Revenue Recognition:

The company receives 15% to 20% advance payment before they start the project . Based on work completion they keep invoicing the client now this is where the receivables build because they allow 30 t0 40 days for the client to clear the payment.

Once the entire project is completed before the delivery the client has to settle all the milestone payments and the final payment if the payment is not made the project will not be delivered.

The company has close to INR 15.7cr of receivable as on 31st march 2023 but out of this they have collected close to INR 13 Cr and the balance is only INR 3 Cr which they expect to collect in the coming time. So in a project between the advance payment and final payment they recognize a lot of revenue which they actually don’t receive but once the project is done the entire payment is settled.

Financials:

What we like: 

1. Robust management team with years of experience:

Mr. Bejoy Arputharaj Sam Manohar, aged 39 years, is the Promoter and Chairman & Managing Director of the Company. He holds a degree in Bachelor of Science in Computer Science from Kalinga University. He has been designated as Chairman and Managing Director of August 8, 2022 for a term of 3 years. He has an experience of around 22 years in the Industry. He is the key driver of the growth of the Company at present level. He is responsible for the managing and supervising operations, expansion of business, sourcing new projects and overall management of the business of our Company. His abilities have been instrumental in leading the business of the Company.

2. Strong client base:

The company has a very strong client base. In the past it has worked on some of the top films including Vikram, Beast, RRR, Baahubali, Robot etc. The company is not just limited to Bollywood but it has been working with Hollywood as well. Its top projects in Hollywood include – Avengers, The Flash, Superman and Lois, Transformers etc. They retain 8 out of 10 clients which come to them so they get repetitive orders from their previous clients. Also, with current focus as the company grows they will be able to bring in more clients.  

3. Robust order book:

The current order book comprises 15 under execution orders with total contract value of ~INR 700 Mn. expected to be completed in a period of nine months. Further order inflow worth INR 240 Mn. are expected from a large OTT platform. The company expects to do a INR 100 Cr topline by this year’s end. 

Factors to consider:

1. Success is dependent on their employee. Their ability to attract and maintain people qualified technical personnel, will affect the results of operations and financial condition

2. Company operates in the constantly evolving VFX market, which is subject to rapidly changing clients behavior and tastes. It requires it to quickly react to changing technologies, market dynamics and clients behavior and preference

3. They have substantial working capital requirements and may require additional financing to meet working capital requirements in the future

4. Highly competitive and the relationship of the company with film producers determine the possibility of future contracts.
5. 70% revenue of the company comes from top 10 clients. Any client leaving the company will hamper the sales of the company. 

6. Artificial intelligence might affect the industry and so the topline of the company will also be affected.