Incorporated by second generation enzymologists, the Rathi brothers in 1989, Advanced Enzyme Technologies (AET) is one of India’s largest enzyme companies with a product basket of over 400 proprietary products developed from 68 indigenous enzymes , probiotics. It offers these products to more than 700 customers in 45 countries around the world. AET develops enzymes mainly from microbial sources, using environmentally friendly biotechnological processes. We are launching a cover on AET to seize the opportunities of this integrated B2B enzyme player with plans to expand into B2C in areas such as nutraceuticals and probiotics.

Oligopolistic environment, large addressable market in the foreground

Globally, the growth of the enzymes market relies on a diverse customer base. This, together with a limited number of significant players, has created a conducive business environment for existing players in the space. Note that enzymes as a cost versus percentage of sales are not important, but their effectiveness is very important for the final product, including the constitution of the final product in terms of taste, appearance, aroma and , therefore, product quality perception leading to a significant supplier adhesion. With a revenue bandwidth of only Rs. 440 crore (~ US $ 60 million) AET remains a marginal player in the global enzyme landscape which is estimated at around US $ 10 billion and is poised to grow to a 6-7% CAGR as more and more applications in user industries incorporate enzyme technologies. Despite being a smaller player, AET’s product basket of over 400 products is a testament to its proven capabilities.

Specialized business model with high barriers to entry

One of the biggest challenges facing new companies looking to enter the enzyme industry is to offer continuous and differentiated solutions according to customer requirements which require real-time R&D capability and flexibility in the process. manufacturing. Great manufacturing capabilities, proven capabilities, experienced promoters, customer loyalty, fairly consistent track record, the ability to develop new products in-house, and the pursuit of unique acquisitions are some of the differentiators for AET. Revenue grew at a CAGR of 11% to Rs. 444 crore in fiscal year 16-20 by organic and inorganic route.

Assessment and outlook

AET is poised to seize the growing opportunities in the enzyme and probiotics space, supported by proven capabilities and stable finances that have been fairly consistent, thanks to a mix of organic and inorganic growth strategy employed by management. . Strong margins and healthy return ratios reflect the pricing power and strength of the company’s balance sheet. In the future, the management intends to increase its R&D capacity for better facilitation and strengthening of internal R&D capacity, which bodes well in the long term in its pursuit of improving the business. scalability and possible foray into more complex enzymes. We are assigning a target price of Rs. 425 based on 25x FY23E EPS of Rs. 17.

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Shares of Advanced Enzyme Technologies Ltd were last trading in BSE at Rs.330.25 from the previous close of Rs. 342.3. The total number of shares traded during the day was 36,542 in over 2,713 transactions.

The share hit an intraday high of Rs. 345.55 and an intraday low of 327.95. The net turnover during the day was Rs. 12,209,448.