Buy Advanced Enzyme Technologies Ltd For Target Rs.480 - ICICI Direct
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Strong Q1 numbers with addition of SSPL…
About the stock: Advanced Enzyme Technologies (AET) is a focused, research driven Indian enzymes company with a product basket of 400+ proprietary products developed from 68 indigenous enzymes and probiotics.
* The business is divided into three segments - 1) human healthcare, 2) animal healthcare & 3) industrial processing business
* It has seven manufacturing & six R&D facilities, which consist of three integrated fermentations, recovery & formulation facilities, one extraction and recovery facility and one satellite blending, mixing & formulation facility
Q1FY22 Results: AET reported robust Q1FY22 results.
* Sales were up 24% YoY to | 137 crore
* EBITDA in Q1FY22 was at | 62.8 crore, up 21% YoY with margins at 45.8%
* Consequent adjusted PAT was at | 38 crore (up 11.1% YoY)
What should investors do?
AET’s share price has grown by ~1.4x over the past five years (from ~| 275 in July 2016 to ~| 399 levels in July 2021).
* We retain our BUY rating on the stock
Target Price and Valuation: We value AET at | 480 i.e. 26x P/E on FY23E EPS
Key triggers for future price performance:
* AET remains a marginal player in the global enzymes landscape that is estimated at ~US$10 billion and poised to grow at 6-7% CAGR as more applications across usage industries incorporate enzymatic technologies
* It has got proven capabilities and stable financials, thanks to a mix of organic & inorganic growth strategy employed by management
* Going ahead, AET plans to augment its R&D capability, which bodes well in long run in its quest to improve scalability & foraying into complex enzymes
Alternate Stock Idea: Apart from AET, in our healthcare coverage we like Laurus.
* Laurus Labs operates in the segment of Generic APIs & FDFs (formulations), custom synthesis and biotechnology
* BUY with a target price of | 785
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