Is this still listed as SME stock? I tried buying small quantity of this and couldn’t buy it from ICICI Direct. Does anyone know if there is a specific quantity of shares I need to buy or I cannot buy it at all?
Yes, it is NSE SME stock. You need to buy min 1200 qty per lot. You can find this info on NSE website
Here is my attempt to summarize VFX industry. Would love to hear opinions from folks on my summary and specially for the risks, please highlight any other risks that you think of.
Global VFX Market Outlook:
The market is estimated to grow at a CAGR of 12.9% during 2024-2032.
2023 market size: USD 35.59 billion
2032 expected market size: USD 106.04 billion
Ref: Visual Effects (VFX) Market Report, Size, Share 2024-2032
Applications of VFX
- Movies
- Television
- Gaming
- Advertisement
- Virtual Reality
- Songs
Growth Triggers for VFX industry
1. Demand for high-quality content and Growth of Over-The-Top (OTT) channels
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In 2022, the global OTT video revenue was estimated to be USD 116.5 billion and it is estimated to reach USD 174.6 billion by 2027. VFX costs on a high-budget sci-fi/fantasy film can be around 20% of the total film budget.
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North America is one of the key regional markets for visual effects (VFX). In 2023, the average movie production budget of the USA, the top movie-producing country globally, was around USD 95 million. The country produced 1,282 movies in 2023. On the conservative side, if we assume 10% of total films use VFX (i.e. 128 movies) and it’s VFX budget is $2 billion (12895(20/100)) out of which India takes 20% market share i.e. $486 million. Out of TAM of $486 million, assume BFS gets 5% revenue which comes to $24 million which is about 200 crores (USD/INR Rs 83) is still more than 100% increase from past year.
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According to industry reports, in 2022, the global media and entertainment industry experienced a growth of 5.4% compared to the last year, culminating in revenues amounting to USD 2.32 trillion. Blockbuster films consistently rely on extensive visual effects and remain a significant attraction for viewers in cinemas and on streaming services worldwide.
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Indian OTT is at a scaling stage as per BCG.
2. Growth of Gaming Market
- In 2023, there were 3.22 billion video game players globally, a 4.21% growth compared to 2022. Gaming sector supports VFX market.
- The gaming market in Europe is a significant contributor to the demand for VFX solutions. In 2022, consumers spent around EUR 24.5 billion on video games across various European markets, an increase of around 5% compared to both 2021 and 2020.
- Mobile gaming accounts for approximately 70 per cent of the total revenue generated by video games, globally
3. 5G rollout
- With the Asia Pacific, India and China are significant revenue generating markets for VFX. The affordable data costs in these countries are a primary factor behind the expansion of their telecom internet user base, which in turn, drives the demand for digital entertainment, including online videos, audio streaming, and gaming.
Indian VFX Market Outlook
- The Indian VFX and animation industry is projected to achieve a CAGR of 20% to 25%, reaching an estimated market value of INR 190 billion by 2025 (Appendix D). Reference: https://timesofindia.indiatimes.com/blogs/voices/indias-vfx-and-animation-industry-booms-with-demand-and-innovation/
- Indian has <10% of global VFX market share in VFX and Animation sector currently, potential to scale upto 20-25%.
- UK has emerged as the primary VFX hub in Europe.
- Indian VFX & animation experts’ cost ~1/5th the cost of western counterparts.
- VFX & animation can be the next IT-BPM boom and play a fundamental role in India’s M&E by 2030.
- According to Statista, even with the challenges posed by the COVID-19 pandemic, India’s animation and VFX industry was valued at approximately Rs 107 billion in 2022. Interestingly, within this market, the VFX segment contributed the highest revenue, totalling around Rs 50 billion.
VFX Outsourcing Trend from 2014-2019
- The Canadian VFX industry experienced a period of significant growth between 2014-2019, particularly in Montreal because of generous tax incentives, Global Studios Setting Up Shop and Talent Pool Growth.
- During VFX outsourcing from US to Canada, Canada grew at 25% CAGR from 2014-19.
- Canada has around 100 VFX studios. Vancouver and Toronto are hubs for several animation and VFX service providers
Risks:
- AI tools are a huge risk for VFX industry as a whole, specially with modern text to image tools.
- Although VFX work is being outsourced to India now and major global VFX studios are setting up shop in India, it isn’t a complete takeover. Established VFX hubs like Montreal Canada, still offer advantages like tax credits and time zone proximity, making them attractive options for studios.
- Finding senior and creative talent pool is extremely tough and Indian VFX companies will poach each other to get those. Companies need to internally work on growing junior employees to work on different roles, specially on creative roles which would create more senior talent pool within India.
Appendix A: Understanding movie production lifecycle
References:
FICCI EY: Indian M&E sector crossed INR 2.3 trillion in 2023, expected to reach INR3.1 trillion by 2026, reveals the FICCI-EY report
BCG Indian Media Industry Report: https://web-assets.bcg.com/7b/a8/1eff85904e408c18fb8284a299f9/blockbuster-script-for-the-new-decade.pdf
Dis: Invested and biased towards VFX sector after reading all of these articles.
2 Likes
now trading in lots of 300
Pathetic result decline in revenue from operations and bottomline declines by more than 50%. With all expectations they had raised of 80% CAGR in this segment their crediblity gone. They have invested in talent as seen in increase in employee benefits but poor peformance in view of high guidance is impossible to comprehend. Will exit even it means at a loss as I suspect lower circuits will follow
2 Likes
standalone results are fine. Revenues are like H1 mainly due to the Hollywood strikes. on a consolidated level results are down due to increase in employee expenses in the UK and Canada subsidiaries. There is virtually no sales from these subsidiaries with massive increase in employee expenses. when the company scales up these subsidiaries the numbers will look quite different.
FY 25 will be interesting to watch out for.
Disc - Invested
4 Likes
Results are on expected lines, in fact slightly better in terms of revenue given the strike in hollywood. The expenses are higher because of additional manpower needed for fast rampup. The Tax expense is a bit high but that is more accounting than business. Overall, in line results. Given the increase in manpower expenses, FY25 is expected to be a strong year from Revenue perspective.
1 Like
More than P&L performance, one should check its balance sheet. FY24 Debtor days stand at more than 6 months. Which company gives average credit of 6 months?
4 Likes
The Company presented revised financials with employee costs lower this time. How should one interpret this? Have you seen this happen before with any other company?
Taylormade Renewables had a history. They adjusted Balance Sheet (Most probably they had offset the Receivables). Receivables decreased by 20 cr on a 70 cr Balance Sheet.
H1 FY 24.
Disc: Invested in none.
The management is super unprofessional, they saw the stock price at lower circuit and therefore moved the employee expenses in the subsidiary to capitalisation account. Typo error is something like adding a zero to a number or visa-a-versa but this is complete management of the numbers to pump the stock price.
4 Likes
What does the group here thinks about the current fiasco of revised P&L statement? Revised result are good, however, it feels like management may have lost trust.
Although, just to be fair on them, they are really new to all the stock market processes and these sort of things can happen, but I am new to stock market so cannot say anything for sure, would love to hear others opinion on how to interpret it. Also, does anyone know when would be the concall for these results? Are SME stocks supposed to do concall? They did one for previous half yearly results.
I still believe in the overall trend of VFX outsourcing to India and have seen multiple reddit sub threads claiming the same thing and with government push, I do believe this will be a 100 billion USD industry in next 10 years.
Disc: Invested and biased.
concall is scheduled on 8th May. https://nsearchives.nseindia.com/corporate/BASILIC_02052024183859_Prior_Intimation_of_Investors_Analysts_Call.pdf
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Results were not as expected.
I will not judge promoter by error in result, as I have never met, talked to them. Will give them benefit of doubt.
With recent correction stock is at 26 PE, With expectation of high growth ( how much, we need to figure out) for few years at least.
Concall will be good place to understand future.
D: Invested
1 Like
Finally some logical comment
Many people have started blaming promoters like they are criminals.
Maybe they have done some gimmicks in the results, no one can be sure about that.
What needs to be seen is what future holds for the company.
We take guidance by them with a pinch of salt, they have guided for 80% growth, we can take it as 50% on lower side to be safe and current PE in range of 25-27, PEG ratio comes out to be 0.5, which in my sense is not horribly expensive.
Such issues will come up again & again, especially in smallmidcaps.
Looking forward to concall and Digikore results
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Why should we take the guidance with a pinch of salt? The topline is almost same as H1 . We know the problems in Hollywood because of this strike. Given the background, result is very promising. If the management has walked the talk, we must take their guidance at face value and evaluate actual position on prevailing industry situation.
Having three entries muddled up is not typo
Employee Expenses reduced, current assets go up, direct expenses changed
In their favour tax paid was based on higher value.
Could be intentional, oversight, who knows. Definitely not done themselves any favour
P.S.: disclosure : invested. Exited partially today
1 Like
People exiting or entering a stock based on one exchange filling error should revisit their thesis (if they have one) before making such decisions. Especially in case of SME stocks, one needs to have strong understanding of the business before buying the stock.
But looking at the reactions here, looks like people just jumped in the wagon reading the word VFX in company’s profile and are now jumping out because company didnt show 50% profits YoY (I dont think they even promised that).
In stock market, decisions without thinking are the most expensive ones. Please be patient and wait for clarification to emerge after concall scheduled next week.
2 Likes
It is even more justified to exit an SME stock based off an ‘error’ in financial statement. It is more likely that the promotors are shady and I believe that promotors is the main criteria for choosing an SME stock. They could be showing less salaries given to the VFX talent and paying them cash under the table for all we know.
1 Like
For margin of safety, if they overdeliver we as shareholders will anyways get benefit