Advanced Enzymes Fundamental Snapshot

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Let’s dig deeper into the Advanced Enzymes fundamental analysis.

Advanced Enzymes Business: Manufacturing of Enzymes and Probiotics

Enzyme: Biocatalyst that increases reaction rate (Like in various ads we have seen –“with Added Enzyme)

  • Human Nutrition, Animal Nutrition, Food Processing & Non-Food Processing
  • Enzymes are used in Human Health Care and nutrition, Animal nutrition, Fruit and vegetable processing, dairy processing, textile processing, leather processing, paper, and pulp processing, etc.
  • Nutrition linked product importance have more important Due to Covid19
  • Incorporated as Advanced Biochemicals Pvt Ltd in 1989.
  • 400+ self-owned products developed from 68+ indigenous enzymes.
  • Largest Indian Enzyme Company
  • Amongst Top 15 Global Enzyme Companies, Customers worldwide 700+
  • Presence in 45+ countries (although Revenue 80% from USA and India)

Management: (Experienced and management has been with the company since long)

Chairman and Promoter – VL Rathi (37 years of experience in the enzyme industry)

– CFO-Beni Prasad Rauka ( CA and CS) with the company for 24 years

-R&D head- Dr. Anil Kumar Gupta Ph.D. in Microbiology with 18 years experience in Industrial biology

(Joined Advanced Enzyme in 1996 as junior research associate)

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Important Highlights:

  • Revenue share 57% international and 43% India (42% for USA, India 43%, Rest 15%)
  • 76% from Human Nutrition ( Act as trigger after Covid19),12% Animal Nutrition and 12% Industrial Bio-Processing.
  • Subsidiary companies – Advanced Enzyme USA Inc, Advanced Enzytech solution, Advanced Bio-Agro Tech Ltd., JC Biotech Pvt Ltd, Advanced Enzymes Malaysia & Advanced Enzyme Europe
  • 7 Manufacturing plants– 5 in India and 2 in the USA.
  • Promoter holding: 57.9%, Mutual Funds 8.78%(HDFC Small cap 6.84%), FPI 11.1%

FPI+Mutual Funds stake rose from just 6.81% on 31 March 2018 to 19.9% on 31st March 2020.

FPI and Mutual funds have a heavy stake in it (Very positive)

FINANCIALS:

  • Revenue has grown in 5 years with CAGR of 15% while profit at 21%.
  • Debt during 5 years has reduced from 115 cr in FY15 to just 25cr in FY20 i.e. have become virtually debt-free, against the reserve of 817cr( DE ratio just 0.03).
  • During the same time companies, Fixed assets increased by 281cr that shows the company is generating good cash flows.
  • EBITDA Margin is good at 46% in FY20 which rose from 42% in FY18.
  • Net working capital cycle also has been in the range from around 115 days.
  • R&D expenditure as % of Net sales stands at 3.24% which is also a good sign.
  • CFO rose from 53cr to 141 cr at the same time.
  • ROCE 23%, ROE 18%, Trading at PE of 14.4, and PB of 2.2.
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Arman Nahar
C.A. who is a USA CFA L3 candidate | Cleared L1 & L2 | Doing independent equity research since 2016 | Screens stocks for investment | Makes in-depth valuation models | Crafts portfolios.
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