Thread by @ValueEducator

Detailed Analysis of Phantom Digital Effects - A fast growing micro cap in the era of increased media consumption.

CMP - ₹359

Like and retweet for maximum reach!!
#phantomfx

1. Company Overview
• Phantom Digital Effects is a studio that provides visual effects and animation for Movies, TV shows, Web Series, Commercial and Videogames.
• They have worked on several international projects like The Avengers, The Flash and Transformers as well as

domestic mega projects like Bahubali, RRR and Brahmastra.
• The company was started in Chennai in 2010 and today it has over 600 employees across 3 offices in India.

2. Services Provided

3. Process

4. Geographical Presence
• The company currently has offices in Chennai, Mumbai and Hyderabad in India. They are also planning to expand in Kochi in the near future.
• Internationally, the company has offices in Los Angeles, Vancouver and Dubai.

Management has said that they will be opening an office in London as well during the financial year.

5. Payment Terms
• Management has said that they receive 15-20% of the payment in advance at the start of the project.

• Subsequent payments are based on completion of milestones. Clients usually take 30-45 days to clear milestone payments.
• The final payment which will usually be about 5-10% is paid upon delivery. There is no credit period for the final payment and the company only releases

the finished project to the client upon receiving 100% of payment.
• However, the company gives a credit period of 30-45 days to large reputable clients like Netflix and Amazon.

6. Entry Barriers
• Phantom Digital Effects is a TPN (Trusted Partner Network) certified studio. This certification is important to be able to work with large studios on large budget movies.
• The studio needs to have a high quality of technical expertise to be able to execute

demanding projects. This competency cannot be gained overnight and requires years of experience to develop.
• Management has also said that it is hard to recruit quality talent in this field as most of the studios in India go for process oriented work and there are

very few actual creatives who can do the job well.

7. Competition

8. Tailwinds
• The VFX industry currently is where the IT industry was in the 2000s. Labor cost arbitrage is causing a shift from US and European studios to India.
• There has also been an explosion in VFX heavy content recently where not just big budget movies have high

VFX budgets, but web series like Stranger Things on OTT platforms also have impressive visual effects.
• This trend is expected to continue as large OTT companies like Amazon, Netflix and Disney spend more on acquiring exclusive content.

9. Future Outlook
• The management has given a guidance of 75-80% growth in revenues in FY24 with EBITDA Margins of 33-35%.
• The order book stands at ₹70 Cr, with ₹10-15 Cr of new orders expected 1-2 months. The management has said that they expect total orders of

₹130-140 Cr during the year, but they will be able to execute only 80% of it in this financial year.
• The company plans to take the total employee count from 600 currently to about 2000 in a few years. For this, they have expanded their offices in Chennai along with opening

new offices in Mumbai and Hyderabad. They also have plans to open an office in Kochi. Management has said that employee count will go up to 1200 by June 2024.

10. Financials

Watch the full interview with the management on my YouTube channel:

Join the Micro Cap Club:
bit.ly/3zYY8OS