Advanced Enzyme Technologies Ltd. (AETL) is the largest Indian enzyme company and is engaged in the research & development, manufacturing and marketing of 400+ proprietary products developed from over 68 indigenous enzymes and probiotics. The company has manufacturing facilities and research & development centres in India, US and Germany. It exports its products to more than 45 countries across six continents.
Outlook & Valuation: AETL’s international sales grew by ~21% YoY and ~15% QoQ in Q4 FY21, led by expansion in baking and nutraceuticals. The nutraceutical industry is currently growing at a CAGR of 8.3% and the awareness of nutraceuticals has increased due to the pandemic. Growth in this segment is expected to aid the profitability of the company going ahead.
In Q4 FY21 EBITDA margin de-grew sequentially by 700 bps. However, margin expanded by 38 bps in FY21 on YoY basis. Going forward we expect the raw material cost pressure to continue in FY22. Despite this, with favourable product mix and better resource optimization, margins are likely to be maintained in the range of 43-46%. Keeping this in mind, we value AETL at a P/E multiple of 30x to its FY23E earnings and maintain BUY rating for the stock with a revised target price of Rs. 486 (up from Rs.424).
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