Here’s a detailed note from concall

Company Overview:

• Founded: 2017
• Specialty: Manufacturing aluminum and copper heat exchangers, condenser and evaporator coils, primarily for HVAC&R applications.
• Production Capacity: 1 million units annually, with a facility spanning over 100,000 sq. ft.
• Listing Date: Recently listed on NSE and BSE (Oct 2024).
• Revenue Sources: 81% from domestic sales, 19% from exports (Q2 FY25).

Q2 FY25 Financial Highlights:

• Standalone Revenue: Surpassed INR 100 crore (39.41% YoY increase).
• Consolidated Revenue: INR 92.53 crore (28.41% YoY increase).
• EBITDA: Consolidated EBITDA grew 36.38% YoY to INR 19.59 crore, with a 21.70% margin.
• Net Profit: Increased 42.98% YoY to INR 12.37 crore, with a 13.35% net profit margin.

Future Revenue Growth Projections:

1. Expansion Plan with New Subsidiary (KRN HVAC Products):

   • Capacity Expansion: Sixfold increase, aiming to cater to rising domestic and export demands.
   • Funding: Primarily through proceeds from IPO, internal accruals, and potential bank financing.
   • Timeline: Sample production expected to start in April 2025, with full-scale commercial production by Q2 FY26.

2. Revenue Contribution from New Capacity:

   • Targeting significant contributions by FY26 as the capacity expands and reaches ~85-90% utilization within three years post-expansion.
   • Revenue Projections: With full utilization, peak potential from this new capacity could exceed INR 2000 crore.

3. Key Drivers of Future Growth:

   • Product Diversification: Launch of bar and plate heat exchangers, roll bond heat exchangers, and expansion into new applications (e.g., oil cooling in heavy machinery, electric locomotives).
   • Market Demand: Expanding demand from sectors like data centers (contributed 7% to revenue in FY24), with Schneider Electric as a major client.
   • Export Market Penetration: Targeting Europe and North America, leveraging anti-dumping tariffs on Chinese imports in the U.S. and demand for high-quality, reliable heat exchangers. Plans to add more clients in Europe and North America, bolstered by successful exhibits in these regions.

4. Strategic MoU with Rajasthan Government:

   • Objective: INR 1000 crore investment plan under the “Rising Rajasthan” initiative.
   • Funding Strategy: Combines IPO proceeds with internal accruals and, if necessary, additional financing.
   • Timeline: Investment spread over five years, expected to generate substantial revenue as new capacities become operational.

5. Customer Base and Sales Strategy:

   • Major Clients: Top clients include Daikin, which contributes 33% to revenues, and Schneider Electric, covering around 90-95% of KRN’s data center business.
   • Revenue Diversification: Plans to add new clients in both domestic and export markets, with over 200 potential customers in the pipeline.

6. Profitability and Margin Growth:

   • Efficiency Gains: New facilities will have a solar-powered 8 MW unit and benefits from Rajasthan’s RIPS 24 policy incentives, potentially enhancing EBITDA margins.
   • Export Revenue Impact: Export margins are generally higher than domestic, with the potential to further lift overall profitability as export share rises.

Investment Summary:

KRN is well-positioned for substantial growth due to strategic expansions, product diversification, and strong export potential. The company’s substantial capacity additions, key partnerships, and growing client base in the HVAC&R sector indicate strong future revenue prospects with stable profitability margins.

The concall is extremely difficult to hear, did anybody found the transcript for it? Top line has substantially decreased, it is very concerning. Thoughts from the community here?

Phantom Digital FX Limited – H1 FY25 Analysis and Future Revenue Projections

Company Overview

Phantom Digital FX Limited specializes in visual effects (VFX), post-production, and digital animation for the global film and entertainment industry. The company serves clients internationally, with a strong presence in the US, UK, and increasingly in Asia, particularly China. They are focused on expanding their capabilities in virtual production and automation-driven post-production processes.

Key Highlights from H1 FY25 Results

Financials:

• Consolidated Total Income: ₹36.65 crore.
• EBITDA: ₹16.32 crore (EBITDA margin: 45%).
• Net Profit: ₹8.27 crore consolidated.
• Standalone Revenue: ₹35.96 crore with an EBITDA margin of 45.57%.
• Receivables: Outstanding receivables stood at ₹66 crore, up 30% from ₹51 crore in March, mainly due to extended credit terms in a competitive environment and delayed collections from major clients.

Performance Drivers:

1. Strategic Partnerships:
   • Entered into a partnership with a leading Chinese production house, supported by the Chinese government, to establish a stronger presence in the Asian market.
2. Technological Investments:
   • Launched a virtual production unit integrating AI and automation tools, boosting productivity by 15%.
3. Expanded Team:
   • Welcomed experienced VFX professionals to strengthen production capabilities and facilitate rapid project execution.

Challenges:

• High Receivables: The company faces delays in collections, with outstanding receivables reaching ₹66 crore, partly due to extended credit terms to stay competitive.
• Revenue Delay: Several projects completed in H1 were categorized as “work in progress” rather than billed revenue, leading to lower recorded revenue in H1. This is expected to be recognized in H2.

Future Revenue Projections and Guidance

H2 FY25 and Full-Year Projections:

The company projects a significant recovery in revenue for the second half of FY25, aiming to reach a total revenue of ₹100-110 crore for the year. This translates to an expected H2 revenue of ₹64-74 crore. Contributing factors include:

1. Backlog Billing:

   • Approximately ₹44 crore in completed projects currently classified as work-in-progress is expected to be billed in H2, providing a strong foundation for the upcoming half-year revenue.

2. New High-Value Project:

   • A major project for Tiket, an international client, is projected to contribute ₹30 crore in revenue for H2.

3. Order Pipeline and Bidding Success:

   • The company has submitted proposals totaling ₹100 crore, with a 20% expected success rate. This could yield an additional ₹15-20 crore in new projects for H2, boosting their overall revenue outlook.

FY26 Projections:

Management expressed optimism for growth in FY26, with a projected revenue range of ₹130-150 crore. Key factors include:

• Expansion in China: The partnership with a Chinese production house is expected to generate new high-budget VFX projects, including a potential ₹100 million VFX film in production.
• Virtual Production Growth: Expected to contribute 15-20% of revenue by FY26 as demand for advanced VFX and virtual production grows, particularly in Asia and the Middle East.
• TIPET Integration: The TIPET acquisition is expected to boost Phantom’s revenue by enabling the company to pursue large, high-quality international projects, especially in Hollywood.

Operational and Strategic Highlights

1. Receivables Management:

   • The company aims to collect 60% of the current receivables by year-end, targeting improved cash flow and stronger financial health.
   • Management plans to tighten credit terms in future contracts to avoid further increases in outstanding receivables, as competitive pressures decrease.

2. Technology Investment:

   • Phantom is investing in AI-driven production processes and generative AI capabilities to reduce costs, increase output speed, and improve overall project quality.
   • The virtual production unit enables clients to achieve photo-realistic pre-production, which is attracting interest in new markets and could position Phantom as a leader in cutting-edge VFX technology.

3. Talent Acquisition and Retention:

   • Phantom has recruited industry veterans and is implementing an Employee Stock Option Plan (ESOP) to retain key talent, especially those involved in critical projects and new revenue-driving initiatives.

Key Risks

1. Receivables Risk:

   • High outstanding receivables, particularly from international clients, could impact cash flow if not managed aggressively.
   • Delayed collections in the competitive VFX industry may continue if competitors offer lenient payment terms.

2. Competitive Pressure:

   • Increased competition in VFX, particularly from companies willing to compromise on credit terms, poses challenges to Phantom’s revenue and margin targets.
   • The company’s move to offer extended credit terms temporarily helped retain clients but impacted H1 performance.

3. Project Delays:

   • With project timelines extending up to two years for some high-end VFX work, delays in client milestones could impact revenue recognition and cash flow.

Thanks Vivek for sharing your experience. The same conclusions are drawn from the report, major issues are with software, shared in the same thread by me in past.

Recently I also asked Zomato driver who delivered in OLA. He says issues are there and said “mai software update nahi karta”. If you don’t update software there is no issue. When asked if he would recommend the scooter to others, on this he said he purchased ola recently for his brother. I said you faced such issues than why, he replied as this is cheapest.

We need to understand, that EV is the technology recently invented vs ICE which is matured and in practice since long. Boy in my neighborhood faced battery issue in chetak, within 4-5 months of purchase, bajaj had to replace it with new one.

OLA is the lowest-cost producer due to its in-house manufacturing of key components, including batteries. If OLA bleed than other bleed at much higher rate. The same can be seen current results of incumbent. Even with low cost OLA can be breakeven or profitable which is extremely challenging for others.

Disc: Invested and views are biased.