Hello Sir,

Hope you are doing well.

In Oct’22, Phantom Digital Effects listed in the market.

It’s a a full-fledged creative VFX studio.

Indian animation and VFX industry is now a back office of the world and reported 57% growth in 2022, as per FICCI-EY.

Considering the fast paced growth of the industry and the potential for Indian players to collaborate with International studios and OTT platforms, we decided to look at the company in some detail. Below, we have shared notes from Q2 FY 24 con-call of the company.


Before that, a few days back, we released our new stock recommendation for our Alpha and Alpha + Members

Company’s main growth and profit driving segment has grown more than 10x in terms of sales and profit in the last 10 years. We believe it has the potential to double its PAT in the next 3 yrs

For details on the stock click HERE


Phantom Digital Effects – Notes from Q2 FY 24 con-call

– About the company

  • Commenced in 2011, Phantom Digital Effects boasts over a decade of experience in the creative realm of visual effects industry
  • Positioned at the forefront of India’s creative VFX service providers, we hold a prestigious TPN certificate
  • We provide comprehensive services, cover a spectrum of capabilities, including final shot compositing, 3D element creation, life-like creature and environment designs, and many more for commercials, feature films, and web series, helping them at pre-production, production, and post-production phase
  • We have successfully delivered over 250 projects and 3,000 shots, earning approved vendor status from esteemed content providers like Amazon, Walt Disney, and Netflix

– Business Update

  • In H1 FY24, We signed a groundbreaking deal with a major OTT. This momentous agreement is worth a minimum of INR1,200 million to be executed over four years
  • Our international revenue mix increased from 26% in H1 FY23 to 32% in H1 FY24. With plans to further shift this to 70%
  • To meet the growing demand, we have expanded our studio space. We have expanded our Chennai studio by 13,200 sq. ft., bringing the total space to 35,000 sq. ft
  • Looking ahead, we are planning to enter into animation and gaming business segment that will position us to serve a broader spectrum of industry
  • Current revenue structure, most of the revenue comes from movies I would say in the range of 70% to 80% followed by OTT and then commercials…OTT would be about maybe roughly around 10% to 15%

– International expansion

  • We have already hired a few people in US and we are in the process of hiring people in UK as well. So, it will be a very small number
  • Over the period of time when we are getting into more of international business and more of triple-A kind of films, so that margin will definitely increase drastically

– Usage of AI

  • We are trying to build some systems where we can reduce this manual work and get it done by AI
  • We have started using AI in rotoscopy which is a process-oriented work
  • We have already started using AI even in the concept stages. Certain concepts are being drafted initially by AI and then our artists are taking forward from there

– Some recent projects

  • We worked on this movie called Leo where we created a complete car chase sequence
  • We are also working on a film called Ayalaan where we are creating aliens and space ships and all the alien world
  • We recently worked on a TV series called Kaala Paani, which released on Netflix

– Guidance

  • We expect the year over increase to be in the range of 75% to 80%, which means that we could look at a top line of around INR 90 crores to INR 100 crores for FY24
  • I think FY25, we are looking at anywhere between INR 135 crores to INR 150 crores of top line. And we expect EBITDA margins to remain at the 35% to 40% level. And PAT margins of around 25% to 30% at this point of time



Disclaimer: This is not a recommendation to buy/sell Phantom Digital Effects. The securities quoted are for illustration only and are not recommendatory.


Best Regards,

Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.com/


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