Basilic Fly Studio Ltd

Stock Opportunities Untested - but worth a good look
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Basilic Fly Studio Ltd. Market cap: 644cr

Business overview:

Established in 2016, Basilic Fly Studio (BFS), is a leading visual effects (VFX) studio headquartered in Chennai, India with subsidiaries operating in Canada and UK.
BFS specializes in creating captivating visual experiences and has gained rich experience in pushing the boundaries of creativity and technology to deliver exceptional VFX solutions for movies, TV shows, web series, and commercials.
Renowned for its high-quality output and commitment to investing in the latest technology, BFS has become a top name in the VFX industry. Its team of skilled artists has earned a reputation for excellence, serving clients from diverse sectors and countries. The company’s work spans across various platforms and end-uses, ensuring that every detail is meticulously crafted.

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Vision and Mission:

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Services:
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Growth Strategy:
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Total Addressable Market:
According to Boston Consulting Group (BCG) and the Confederation of Indian Industries (CII) research, the Indian animation and visual effects industry has the potential to grab 20 to 25% of the worldwide AVGC market ,it is estimated to generate 75,000-120,000 jobs by that year.

In India, the animation sector alone was valued at INR 2,450 crore ($330 Mn) in 2020. A significant proportion of revenues (70-75%) for this sector in India came from international clients, further demonstrating the growth potential of the global VFX industry.

The Animation and VFX industry in India has the potential for further expansion, as these technologies have gained prominence in various fields, including gaming, education, branding, and marketing. The use of animation and VFX in these sectors has contributed significantly to the growth of the industry in India.
Financial and ratios:

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Investment Rationale:

  1. Sunrise industry with huge TAM compared to company revenue/market cap.
  2. Top notch clients like, apple, netflix, sony, fox, warner brothers etc.
  3. Considering to start work for Indian films, OTT, Commercials etc.
  4. High ROE and ROCE.
  5. Revenue guidance of 60% with margin of 45%.
  6. Long runway of growth.
  7. Company working on Kids entertainment, which can have long episodes of 40/45, which provide stability to earnings.
  8. Work on entire value chain. Company can provide services for gaming, education videos, Anime ( my son mostly watch Anime) it is a cult in young people.
  9. I see this company similar to KDDL, RACL gear tech which are in precision work and supply to top notch clients in world.

Catalyst:

  1. Plan to increase manpower from current 500 to 800/1000 in next year.
  2. Two new facility in India and two new in Europe+ south korea planned.
  3. Strike in US for writers have been ended will resume movie/OTT which are halt or due.
  4. Expansion from IPO money, no need debt as of now.
  5. Training people to be Generalist who can do many task.
  6. Automation/copy cat tool to reduce man hours.
  7. added VFX supervisor/manager in team.

Technical:

  1. Company listed recently and is under consolidation, stage 1.
  2. Pivot point at 345 rs.
  3. For this IPO to get 66cr, 14,000 + Cr subscription was seen with more then 7 lakh application. It was gung ho.

Risk:

  1. High Growers, can become slow grower without notice.
  2. Execution risk.
  3. Inherent risks related to entertainment industry.
  4. Competition.
  5. Micro cap.
  6. Top 5 customers are 59% revenue in FY23, which is reduced from previous years.

Presentation: https://nsearchives.nseindia.com/corporate/BASILIC_09112023183725_IntimationunderRegulation30InvestorPresentation.pdf
Conference call:
https://www.basilicflystudio.com/investor-corner/#bfs-h1-fy24-investors-analysts-concall-audio-recording

I request here members to bring industry specific and company specific insights to understand company/industry better.

Disclosure: Invested and looking to add based on opportunity.

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Thanks for this new page. Have you done any comparison with Phantom digital who is in the same domain? How does 2 companies stands in terms of their value proposition, future growth prospects, financial track record, valuation and management quality?

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strong text# Q2 (FY2024) H1 FY2024 CONCALL HIGHLIGHTS

  1. Q2 was very tough due to the Hollywood strike. The Canadian subsidiary was breakeven in last qtr.
  2. Addition of senior people in supervisor divisions.
  3. Good growth compared to last year
  4. Company focused on increasing revenue from Australia and Europe. Also focusing on kids’ entertainment shows(Animation and vfx - 45 episodes kind of shows).
  5. Revenue breakup - 35% of films, 30% of television films, 30% from commercials.
  6. Company mostly work on international projects. Recently worked on a domestic project (Leo). Intend to take some projects in domestic going forward.
  7. Intention to increase the workforce to 800 to 1000 in next 1 year (2024 end) and also planning to upskill our artists.
  8. Receivables days are mostly 45 to 90. In H1 booked more revenue from new customers and that’s why receivable days are piled up.
  9. Nowadays the majority of rotoscopy work is automated. So pushing their roto artists into work on other areas like Composite and Effects(fx).
  10. Since the strike is expecting some jumps in projects from Dec to Jan. Big Projects are starting from next year March or April where basilic studio will work from pre production.
  11. If there is no strike means Revenue would have been doubled in this half.(This shows how much impact due to strike in International vfx market)
  12. As of now 70% of work is coming from sub vendors. Planning to get 50% projects directly from the production house.
  13. Hiring lot of senior level artists and mostly they will join in January

Some Insights from Reddit Platform

Generally Foreign vfx artists are more engaged on the Reddit platform. Many people shared their thoughts about vfx projects recovery post strike, Layoffs in vfx industry. So based on their interaction it seems there were no film or tv shoots & no script written for the last 6 months. In Early May or April there may be few projects where at the end of post production work or movie shoots at the end stage would be affected by sudden strike news. So these projects will be completed in December or january. But the quantum of work would be very low. Also big festival days like Thanksgiving day and Christmas are nearing. So usual work will start from next February and it will pick up from April. So it seems the next half year also would be very difficult for vfx firms.

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Appreciate you work…have you considered the aggressive revenue recognition angle?

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Entered today after looking at other VFX firms , valuation is attractive and visiblity of business is higher. Very transparent management as is evident on concall, if they delivery on growth aggressively PE will go double then current so seems excellent path ahead. DYOD

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Company last week published annual reports of 2022 and 2023.
I am not much in numbers. If any expert can analyze and bring important insights will be very helpful.
From Behavioral prospect, new company submit annual reports out of turn is positive.

Disclosure: Invested and biased.

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Though hunter, already put notes for concall.
Observed it is available on screener. Very cool feature and helpful, as concall is my place to understand company. Thanks ayushmit.

Concall Notes - Nov 2023

Financial Performance:

  • In H1 FY2024, achieved a total income of 49.89 Crores, EBITDA of 24.07 Crores, and a net profit of 18.93 Crores
  • Positive outlook for H2 FY2024 and the future, driven by performance, IPO proceeds, and project pipeline
  • Aiming for 60-70% growth in top line and 30% PAT margin for FY2024
  • Operating margins expected to stay above 45% going forward

Expansion and Facilities:

  • Planning to establish two new dedicated facilities in India
  • Expanding international markets in Europe and Australia
  • Expect to double team strength to 800-1000 members in the next year
  • Utilizing IPO proceeds for new facilities, no need for debt

New Projects and Collaborations:

  • Actively exploring opportunities in kids entertainment and fostering new collaborations
  • Incorporating AI tools to reduce roto work and focusing on software development for automation
  • Testing tool called copycat that can replicate shots with similar shapes
  • Worked on project called LEO, contributing to fire shots, fireworks, and aging effects
  • Strong relationships with major production networks like Marvel, Warner, Apple, and Paramount Plus
  • Bigger projects lined up for the future, involving global teams and starting from pre-production stages

Order Book and Project Pipeline:

  • Order book includes projects ranging from 4 to 6 Crores in size
  • Working on projects for the next 6-7 months, with additional projects in the pipeline
  • Focused on expanding relationships with content platforms and production studios

Company Overview:

  • Leading visual effects studio headquartered in Chennai, India
  • Specialize in creating visual experiences for movies, TV shows, web series, and commercials
  • Team of 500+ members operating from offices in India, London, and Vancouver
  • Secured listing on the NSE emerged platform
  • Despite industry challenges, managed to grow and expand workforce to meet demand
  • Canadian subsidiary achieved break-even numbers
  • Appointed key senior positions to enhance capabilities
  • No bad debts in business
  • Constantly recruiting and expanding team in India, London, and LA
  • Strong track record of trade negotiations with clients resulting in advances and timely payments

Disclosure: 9% of Portfolio, highly biased.

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An excellent discussion on the kind of things that are being done in the context of VFX and CGI and how AI is going to impact this.

In summary what they discussed around this subject, the possibility of AI generated actor on main feature film is atleast 05 years away, as the technology is still not at the level producers want in their films.

Overall a good video to understand the cost and time to perform VFX and CGI and what industry experts/professionals have a say on AI applications in their industry.

AI discussion starts at around 50 minute level.

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Trying to understand Demand/Supply for shares in general for SME stocks, as this is my first SME investment.
A quick search point it out that:
Shares purchased by anchor investors in the reserved anchor category are subject to a lock-up period of 30 days for 50% of the shares and 90 days for the remaining 50% of the shares from the grant date.
Means supply may come after 1 month of listing and 3 month of listing, if anchor investor wishes to exit immediately.
I observed many analyst meets by company in last month. This may be to give safe exit to anchor investors or company believes even though it is 3X listed price, looking at ratios and growth guidance of 60 to 70% new investor can come.
Please help to under stand supply/demand equation in SME stocks.
Disclosure: Disclosure: 9% of Portfolio, highly biased.

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I like the financials and also the company but I think AI shall disrupt it soon. https://x.com/itsTarH/status/1728411875317301259?s=20
https://x.com/itsTarH/status/1728439551377731699?s=20

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SI do not know, AI will destroy VFX or not.
What I estimate, in any field, where company is run by competent people, they will find a way to navigate.
Change is the only constant and applies to IT/Technology companies more then any other sector. IT service companies are doing completely different things then what they were doing in 1990/2000s.
I will wait for numbers, if numbers are coming good, we are safe.
Disclosure: Invested

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Management seems aspirational, competent and hungry with tailwind, In pre IPO meet they said that looking for 50 to 80% growth for next couple of years so huge value creations. Invested and increasing positions further…

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Sort of Off topic I suppose, What is the lot size to invest in BFS? Thank you!

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The lot size is 1200.

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Most probably reason behind recent run up.
Disclosure: Invested

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At what price Ashish Kacholia entered Basilic?

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We do not know from his filing, we can guess, as it is in Sept-Dec quarter and highest closing price was 326, we can guess below that.

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Hello thank you,

Could you help me with one thing, VFX is increasing for sure, my question is with AI vfx is mostly becoming more easier than before, will Basilic Fly be benefited? Can it be like Margins can go down?

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AI will help to generate more quantity. For margin management guidance as of now is 45%. We can monitor results. I do not estimate margins will shrink too much.

D: Invested