thanks basu sir for reply that means sir there is no way to replace the ductile pipe by cpcv pipes in coming time.

Can anyone help identify why the CFO is negative in last 3 years? Is it because of inventory? Can someone help identify how this should be looked at given the competitors are constantly showing consisten increase in CFO even with 2.5x inventory build up compared to Senco where its gone up by 1.8x ?

Update on Asarfi post Q2FY25 results as well as some of my own thoughts:

1. Occupancy rate is at 60%. Ideally occupancy should be higher due to lack of hospitals in Jharkhand (they have some competitors in place). And they also face competition from West Bengal which is a medical tourism hub. Company has increased their catchment area to 10 districts.
2. Receivables being high in comparison with other hospitals –

• Company has made a dedicated team to bring down the debtor days but it depends on the govt institutions (Coal India, Railways, Ayushman Bharat) as split is 50:50
• Don’t need immediate equity dilution but this can become a constraint down the line

3. Cancer hospital – 74 Cr invested till date

• FY25: 20 Cr sales (Sep run rate: 1.59 Cr)
• FY26: 35 Cr sales. Management has also said that they want to achieve 6 Cr MRR in 2-2.5 years
• Company will increase bed capacity to 150 in next 2 years with 1-2 Cr investment to primarily be eligible for subsidy of 12.5 Cr from Jharkhand govt under their scheme. This subsidy is yet to be received but application is processed
• The additional 100 beds would primarily be added like general beds to gain the subsidy and the company will keep adding equipment from internal accruals over the years. Seems like this would impact ARPOB

4. ARPOB:

• Multi-speciality – 19,958. Target over next 2 years – 25,000 (seem too ambitious)
• Cancer hospital – 16,748. Target over next 2 years – 30,000

5. Land dispute for cancer hospital

• Land taken on lease from govt. High court said that land is not the governments to give and awarded the land back to a private party.
• The Supreme Court has ordered for fresh adjudication but as per management they have been removed as party to the suit and then it will take 10-15 years to resolve the case
• However, here I am a a little skeptical. I read the SC judgement and the case has just been disposed of for re-adjudication. Nowhere is it mentioned that Asarfi won’t have to fight the case.

6. Land for Health research institution

• Will be used for running allied courses like nursing
• Primarily used for talent generation once they expand their hospital capacity
• Limited revenue generation capabilities (looking at Kovai). But they aim to approach the govt in the future to allow them to create a medical college

7. Vision for next 10 years

• 400 own beds (main hosp + cancer) + 100 (new hospital acquisition) + 500 (O&M mode) = 1000
• 4% sales commission to be paid to hospital partner for O&M
• Sales – 400 Cr with PAT – 50 Cr (30% PAT CAGR is very ambitious) → But then management clarified that they’re targeting 400 Cr revenue in next 4 years

8. Guidance from H1FY25 to FY26

• Beds – 300 to 380
• ARPOB – 19,524 to 19,823 (but this is not in line with their above guidance?)
• Revenue growth – 18% (last 3 years, check if FY24 or H1 Wise) to 29% (next 2 years)
• EBITDA margin – 21.4% to 23.7%
• PAT margin growth – 7.7% to 11% → Essentially they’re claiming a PAT CAGR of ~87% over FY24!!
• ROCE – 9% to 15%

9. Red flags or Areas of concern:

• 18 Cr Loans Disbursed in H1 FY25: I have written to the company secretary regarding this but so far haven’t received any response back.
  • To whom were the loans amounting to ₹18 crore disbursed?
  • What is the tenure of these loans?
  • Are these loans interest-bearing? If yes, what is the applicable rate?

2. Company has claimed to increase ARPOB by 25-30% over next two years in the concall but in the investor ppt they have hardly shown any expected growth.

• One reason could be that management is expecting ARPOB on existing beds to increase but overall no. would decrease due to addition of 100 cancer beds for getting subsidy which would have minimal impact. The numbers make sense

This is interesting. There are some large cap and mid cap stocks which I have also noticed that, have wide fluctuations of 25% to 30% due to market moods. There fundamentals are mostly intact and Intrinsic value is also stable.

ITC has fluctuated between 400 to 500+ 2 times in past one year.
Same might be the case with Coal India. 400 to 550 swing once in last one year.
If one can make a profit of 30% in such large caps then also funds can be compounded safely, off course with STCG tax implications.

In USA markets, these swings do happen on regular basis for large caps. Probably with increasing participation of Retail investors in India, we may also see such 30%-40% swings in Indian large and mid cap stocks in future.

An investor can have small portfolio for such stocks.

Not holding all these stocks. Just mentioning out of observations.

H1 2025 Conference call Highlights:

Call was of poor quality, can not understand much. Following is prepared with copilot,as may points were repeated without adding any value.

In conclusion, company has to show numbers, only talking will not going to work. Still constructive on this space, as revenue grow possibility is high. Of course, margins will dip. As of now major monitorable is integration of ” One Of Us” and improvement in revenue as well as margin.

Industry and Strategic Moves

• Industry Recovery : The industry is gradually recovering from recent challenges.
• Acquisition : Basilic Fly acquired “One of Us,” a VFX studio based in the UK and Paris, enhancing its market position and service offerings.
• Strategic Benefits : This acquisition positions Basilic Fly as a full-service VFX studio, not just a subcontractor.
• Tax Incentives : Improved tax incentives in the UK (from 25% to 29.8%) and Paris (30% for production spend over €250K and 40% for VFX spend over €2 million) are beneficial for VFX projects.
• Future Outlook : The company is set to leverage these strategic moves and incentives for future growth and efficiency.

Financial Performance

• Net Sales : H1 FY25 net sales were 75.48 crores, including contributions from the recent acquisition of “One of Us” on July 29, 2024.
• Turnover : Excluding the acquisition, turnover for H1 FY25 was 39.8 crores, down from 49.6 crores in H1 FY24, reflecting a 15.7 crore decrease due to industry-wide slowdown.
• Positive Trends : Positive trends observed in August and September 2024 suggest potential recovery and improvement in future comparisons.
• Total Income : Recorded at 77.34 crores.
• EBITDA : Stands at 18.68 crores.
• PBT : 15.76 crores, compared to 23.3 crores in H1 FY24.
• PAT : 12.33 crores, including minority interest, down from 18.9 crores in H1 FY24.
• One of Us Contribution : Achieved a PAT close to 5% of the top line from a turnover of 39.8 crores.

Future Projections

• H2 FY25 Guidance : Expected to be twice the revenue of H2 FY24, aiming for around 100 crores. ( At one place they said 150 cr.)
  [BASILIC_21112024112530_Intimationoftranscriptofearningscall.pdf|attachment]
• One of Us Revenue : Current pipeline stands at around £20 million annually, with expectations to reach 100 crores in H2 FY25.
• Order Book : Combined order book for Basilic Fly Studio and One of Us is around 224 crores, with major projects from Amazon, Paramount, and Netflix.
• Future Projects : Active discussions and new projects expected to start from January, targeting releases in June-July.
• Artificial Intelligence : Utilizing advanced AI tools like Comfy, Wonder Dynamics, and Stable Diffusion for internal processes and efficiency improvements.

Operational Updates

• Employee Retention : “One of Us” currently has 288 artists, down from 400. Globally, Basilic Fly Studio has over 715 artists.
• Work Allocation : Some work redirected to India.
• Margins : Current PAT margin around 16% and EBITDA 24%-25%. Slight improvement anticipated due to cost optimization and government incentives.
• One-off Costs : H1 FY25 included one-off costs related to the acquisition of “One of Us.”

Synergy and Cost Savings

• Artist Relocation : 50 to 60 artists from “One of Us” now working in India.
• Cost Savings : Significant savings expected from relocating artists, with potential savings of around £400,000 to £500,000 per month.
• Synergy Implementation : Expected to improve efficiency and cost-effectiveness.

Receivables and Collections

• Receivables Increase : From 54 crores to 104 crores, with around 40 crores attributed to “One of Us.”
• Standalone Business : Receivables risen to 72 crores despite a decline in revenues.
• Impact of Writer Strike : The writer strike has slowed down collections.
• Recent Collections : Around 20-22 crores collected since September 30th.
• Future Outlook : Active efforts to collect dues, with expectations to return to normal levels by March to May.

Employee Costs

• Basilic Fly Studio : Spent around 9.5 crores on employee costs for the first 6 months, with an average headcount of 450.
• One of Us : Employee costs close to 32-33 crores for a top line of 40 crores.
• Total Employees : “One of Us” has 280 employees, including a mix of permanent and contract workers.
• Annual Salaries : Around 64 crores.
• Monthly Salary Cost : Approximately 15 crores.
• Cost Savings from Synergies : Significant savings expected from removing 50-60 employees from the payroll.

BASILIC_21112024112530_Intimationoftranscriptofearningscall.pdf (4.3 MB)

Disclosure: Invested